Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — INDUSTRY

British Steel Corporation

Mr. Neubert: asked the Secretary of State for Industry when he next expects to meet the chairman of the British Steel Corporation.

Mr. Richard Page: asked the Secretary of State for Industry when he next expects to have a meeting with the chairman of the British Steel Corporation.

Mr. Nelson: asked the Secretary of State for Industry when he next expects to have a meeting with the chairman of the British Steel Corporation.

Mr. Michael Marshall: asked the Secretary of State for Industry when he next expects to meet the chairman of the British Steel Corporation.

The Secretary of State for Industry (Mr. Eric G. Varley): I keep in frequent contact with the chairman, whom I last met on 5th April. There is no firm date for the next meeting.

Mr. Neubert: Is it not its poor productivity performance, which is particular to us and is not due to the world recession, which puts the British steel industry at an extra disadvantage as compared with those countries which have an excellent record of reducing manning levels? Will the right hon. Gentleman give support to the proposed incentive scheme offering more pay for more output?

Mr. Valley: I do not think that the hon. Gentleman would want to give the impression that the problems of the British Steel Corporation are unique to

the Corporation. There are major world factors. Along with my colleagues, I am giving support to the productivity changes in the Corporation and to the incentive proposals.

Several Hon. Members: rose—

Mr. Speaker: I shall call first those hon. Members whose Questions are being answered.

Mr. Page: When the right hon. Gentleman next speaks to the chairman of the BSC, will he impress on him the necessity to invest in winners and profit earners, such as the plant at Workington, and ensure that the investment in the new coking ovens there should be carried out as soon as possible? Will he recognise that, while there are surpluses in coke at the moment, with other plant closing down it is essential that these plants at Workington start up immediately? Will he therefore tell us whether the investment is to go in and, if so, when?

Mr. Varley: I have not attended to this matter personally, but I have asked for these factors to be drawn to the hon. Gentleman's attention. For example, I understand that the existing coke ovens will remain in operation. The Corporation has told its work force that the scheme to rebuild the coke ovens at Workington is to be deferred at the moment but will be reviewed in mid-1979.

Mr. Nelson: Following the thoughtful and welcome White Paper last week on the nationalised industries and the change in his relationship with the chairman of the board of the Corporation, does the right hon. Gentleman expect the Government—and, if so, when—to bring forward an announcement of a financial target for British Steel? Does not he agree that it is sadly wrong that the Corporation should not have a financial target, bearing in mind that nearly all the other nationalised industries have such targets statutorily applying to them?

Mr. Varley: The relationship between the Corporation and the Government is a good one. I have paid tribute to the work that Sir Charles Villiers and the management have done over the last few weeks. There is a particular problem over a financial target for British Steel. I made it plain in my statement to Parliament on the publication of the White


Paper that we would be looking at the possibilities of capital reconstruction when the market situation became more certain, and in any event I shall be laying legislative proposals before Parliament very shortly.

Mr. Marshall: When will the right hon. Gentleman and Sir Charles Villiers agree the text of the Government's reply to the various reports on steel by the Select Committee on Nationalised Industries? Does the right hon. Gentleman recognise, after his perhaps rather ill-tempered start, that there are many recommendations that he himself has described as useful and which require urgent decision and debate, particularly such matters as manning agreements?

Mr. Varley: I never lose my temper. On the basis of the Select Committee's report, we are working on our reply over the next few weeks. I expect that that reply will be published in the usual form, that is, as a White Paper. It will be published and laid before Parliament in time for debate on the legislation I have just referred to.

Mr. Roy Hughes: Will my right hon. Friend confirm that the Government are fully committed to saving the British steel industry whereas the Conservative Party, with its persistent sniping, seems quite happy for it to go to the wall? Will he note the response of the work-people to the Government's lead—for example, at Llanwern, which is breaking all records at present? Will he consider visiting that plant in the near future in order to show his appreciation to the workpeople involved?

Mr. Varley: I join with my hon. Friend in saying that the measures announced by the Government have saved the British steel industry. If we had not taken the action we took, the position would be much more serious. We have to get ahead with the modernisation of British Steel and make sure that we have a substantial steel industry capable of meeting the needs of British manufacturing industry.

Mr. Hardy: Will my right hon. Friend remind Conservative Members who take an excessively critical view of many sectors of British industry, particularly the public sector, that the British steel industry today is affected by world

developments? Will he confirm that the British steel industry is operating nearer to capacity than the steel industries in Europe, and perhaps even the steel industry in Japan?

Mr. Varley: I think that that is broadly correct. In fact, most steel industries throughout the world of comparable size to British Steel, whether privately owned or publicly owned, are in some difficulty. We shall ensure that the British steel industry remains substantial, and we want to get it back to viability and profitability as quickly as possible.

Mr. Patrick McNair-Wilson: Is the Secretary of State aware that the chairman of the British Steel Corporation has written to me saying that he is prepared to consider the sale of complete steel plants in closure areas? Will he, when he next meets the chairman, ask him to enlarge upon this scheme? Will he give his Government's full backing to this policy and make sure that no restrictions are placed in the way of these plants if they are sold to private enterprise?

Mr. Varley: I do not know of any proposals and I do not know of the correspondence between the hon. Gentleman and the chairman of the British Steel Corporation. Any requirement to dispose of assets would have to come through the Government, and we should want to look at it extremely carefully.

Mr. Hooley: Has my right hon. Friend discussed with the chairman of BSC the impact on the steel plant making industry of the cut in the investment programme, especially as it may affect Sheffield?

Mr. Varley: I have not discussed the investment programme with the steel plant manufacturers, but my hon. Friend will be aware that substantial investment will take place over the next two years—in the region of £1,000 million. I know that that will be broadly welcomed by the steel plant makers, but if they want to make representation to the Government we shall be pleased to receive it.

Mr. Norman Lamont: Is the Secretary of State aware that we welcome the slimmed-down investment programme in this halfway stage to a sensible policy? But is it not the case, as the Select Committee pointed out, that if action had been taken earlier we should have been able


to afford more modernisation and more investment, and that there would have been a greater degree of job security?

Mr. Varley: That is one section of the report of the Select Committee with which I do not agree. It is implied in some quarters that the Government, on internal financial forecasts for the British Steel Corporation, could have taken action within one or two months of the last financial year. To have eliminated the forecast at that time would have resulted in action which would have been unacceptable, I think, to the majority of those who work in the steel industry and, I suspect, to the majority of hon. Members.

European Community (Council of Ministers)

Mr. Dykes: asked the Secretary of State for Industry when he now intends to meet his opposite number in the EEC Council of Industry Ministers.

The Under-Secretary of State for Industry (Mr. Les Huckfield): There are no current proposals for the Ministers of Industry of the member States to assemble in Council. When industrial matters arise which require collective ministerial consideration, they can be treated by the Council of Ministers (Foreign Affairs) with the participation of other interested Ministers.

Mr. Dykes: Now that the Summit Meeting has launched the beginnings of a concerted economic plan for the whole of the EEC, would it not be right for all the Industry Ministers in all the member States to get together to see what they can do with their own national industries, and what can be done by British industry to contribute to a faster growth in Europe, as the only means eventually by which to try to get unemployment down?

Mr. Huckfield: That can be considered as and when the need arises, but I am sure that the hon. Gentleman realises that most industrial policy matters are currently carried out by Commission working groups. We are involved in a large number of those. The need certainly has not arisen yet.

Mr. Kenneth Clarke: Does not the Minister think that the time has now come to have a Council of Industry Ministers to consider, among other

matters, the competition taking place between member Governments to give subsidies to textiles, shipbuilding, assisted areas and so on? Does he not agree that member Governments, including the British, are tending to give subsidies to industry in a way which might simply put workers out of jobs in other member countries? Would it not be better to develop a Community approach in order to sort out troubled market areas?

Mr. Huckfield: I hope that the hon. Gentleman realises that our schemes of assistance have to be considered by the Commission. Our schemes of assistance are certainly not the only ones in member States, because many other States carry them out. I hope that the hon. Gentleman will accept, however, that on 19th-20th December the Council of Ministers agreed a package on steel. A draft directive on shipbuilding assistance has already been agreed, and we are already involved in many other discussions.

National Enterprise Board

Mr. Tim Renton: asked the Secretary of State for Industry when he next expects to meet the chairman of the National Enterprise Board.

Mr. Rooker: asked the Secretary of State for Industry when he next plans to meet the chairman of the National Enterprise Board.

The Minister of State, Department of Industry (Mr. Gerald Kaufman): I expect to meet the chairman very shortly. We are in frequent touch.

Mr. Renton: Anticipating the Minister's next meeting with the chairman of the NEB, will the hon. Gentleman tell the House what is the NEB's current investment policy, since it does not appear to have one? How many of the 22 companies in which the NEB invested last year are now making the adequate return on capital to which the NEB is statutorily committed?

Mr. Kaufman: All these matters are open for debate later in the day. When I meet the chairman of the NEB I shall be able to discuss with him the NEB investment in a company in which the hon. Member for Mid-Sussex (Mr. Renton) has a constituency interest, Thwaites and Reed, which looks after Big Ben. I


am glad that the NEB is helping to keep the hon. Gentleman on time.

Mr. Rooker: Will my hon. Friend have a word with the chairman of the NEB when he next meets him about the recent appointment of Mr. John Williams of Lucas Industries to the NEB to oversee British Leyland, although this man is on public record as being opposed to public enterprise? Will he also draw the attention of the chairman to the fact that, contary to paragraph 11.11 in the NEB's report to this House on British Leyland, it is not the Government who authorise money to British Leyland but this House?

Mr. Kaufman: My hon. Friend is perfectly right about that. I hope that all hon. Members will realise the importance of voting the extra £300 million to British industry when we debate this matter later today.

Mr. Rooker: What about the first part of my supplementary question?

Mr. Speaker: Order. This subject will be debated later today.

Later—

Mr. Renton: On a point of order, Mr. Speaker. In answer to my Question No. 4 the Minister of State made great play of the fact that the National Enterprise Board was giving assistance to a firm called Thwaites and Reed which, he said, was in my constituency and which is, among other things, clockmaker and mender of Big Ben. I have checked with the NEB, but both of its information officers are in the House of Commons. Thwaites and Reed tells me that its only office and factory in Sussex is at St. Leonards-on-Sea, about 25 miles from my constituency. I have come to realise that the Minister relies more—

Mr. Speaker: Order. I ask the hon. Gentleman to make the point of order on which he is asking me to rule.

Mr. Renton: I should like you, Mr. Speaker, to ask the Minister of State to withdraw his comment about the factory being in my constituency, because it is not. I ask him to give me an answer to my question.

Mr. Speaker: The hon. Member knows that, if I tried to tell Ministers to withdraw answers, or, indeed, the Opposition

to withdraw questions, I should be in even greater difficulty than I am at present.

Private Companies (Subsidies)

Mr. Hugh Jenkins: asked the Secretary of State for Industry to what extent he has subsidised private companies with public money since 1974 to date.

The Under-Secretary of State for Industry (Mr. Bob Cryer): Including an estimated expenditure of £397 million for 1977–78, the subsidies, current grants and capital grants paid to undertakings in those parts of the private sector for which my Department is responsible are forecast to total £1,849 million, at 1977 survey prices, for the years 1974–75 to 1977–78 inclusive.

Mr. Jenkins: Is not that a huge sum of public money? Will my hon. Friend give further details of this in the Official Report, so that hon. Members can put down Questions in individual cases and discover what is happening to this money and whether any of it is wrongly disappearing into private pockets?

Mr. Cryer: My hon. Friend is quite right in saying that it is a huge sum for support to industry under the Industry Act 1972. My hon. Friend will no doubt recall that during the period of office of the Conservative Government the sums were in no way published. It was not until the advent of the Labour Government that the sums payable under the Act were published in Trade and Industry. But I will take note of what my hon. Friend has said and see what information I can publish in the Official Report.

Mr. Adley: Will the Minister tell us how much tax is being paid by all these private companies to subsidise public expenditure? Will he also publish this figure?

Mr. Cryer: The hon. Gentleman has raised an interesting point. He will know that there are 100 per cent. tax allowances on investment in plant and machinery, and the Government have generously given stock appreciation relief, so that the tax incentives to investment and to encourage industry cost several billion pounds a year to the Revenue.

Mr. Robert Hughes: Does my hon. Friend recall that the White Paper entitled "The Challenge of North Sea Oil"


gave the Government's strategy on investment in industry through the NEB? Will my hon. Friend say how this can be achieved without compulsory planning agreements so that public money is not wasted in the way he has just announced?

Mr. Cryer: Certainly the progress with planning agreements has been extremely disappointing. In view of the very encouraging way in which the Government have treated private industry, it seems reasonable for the Government to expect a degree of co-operation towards planning agreements so that a greater degree of planned investment can take place in this country.

Mr. Norman Lamont: Is it not the case that nearly all wealth in this country is created by the private sector and hardly any at all by the public sector, and that these so-called handouts are simply transfers from companies back to themselves? If the Under-Secretary were really serious about the health of industry, would he not point out that industry, quite apart from PAYE contributions, rates, national insurance contributions and corporation tax, is paying three times what it receives in so-called handouts?

Mr. Cryer: I am most interested in what the hon. Gentleman has said. When he and his party next talk about four years of Socialism, perhaps they will bear in mind the remarks that he has just made—that, in fact, the majority contribution which he claims is from the private side of industry. When the hon. Gentleman complains about such matters as a lack of investment or the level of unemployment, perhaps he will bear his remarks in mind.

Inner Cities (Partnership Committees)

Mr. Silvester: asked the Secretary of State for Industry what measures he is proposing to the seven partnership committees as his Department's contribution to the rejuvenation of the inner cities.

Mr. Cryer: My Department is participating fully in the partnerships' initial task of drawing up programmes for action which will include proposals designed to strengthen the economies of the inner cities. It is too early to say what agreed proposals will be put forward by the different partnerships. The partnership authorities will benefit from

the measures announced in the White Paper on inner city policy and from the powers which will be available to them under the Inner Urban Areas Bill.

Mr. Silvester: Is there not a danger of conflict with regard to the increasing number of powers overlaying different geographical areas? Will the Minister consider particularly the conflict between the inner cities and the special development areas?

Mr. Cryer: There is no conflict here. In fact, as the hon. Gentleman knows, the regional assistance is in addition to inner city assistance. But these matters will no doubt be debated on the Inner Urban Areas Bill, when the position can be clarified further.

Mr. Litterick: Will my hon. Friend consider seriously amending the Co-operative Development Agency Bill which is now before the House so that his Department can dispose of funds which could be used directly by his Department for use by workers' co-operatives in the inner city areas?

Mr. Cryer: That is a matter of detail for consideration in Committee. No doubt we shall be considering many such amendments because I know that my hon. Friends are very much concerned and welcome the implementation of Labour's promise to establish a Co-operative Development Agency.

Mr. Michael Latham: Will anything actually come out of these committees, or, like their predecessors, will they just be talking shops?

Mr. Cryer: I take it that the hon. Gentleman is talking about the partnership committees. The local authority members of the partnership committees, in addition to the Government members, are convinced that the partnership committees are drawing up useful and worthwhile programmes. Of course, the test of the committees will be seen in action. In my experience, all the members of the committees are determined to ensure that the action results in regeneration of the inner cities.

Investment

Mr. Knox: asked the Secretary of State for Industry what was the level of investment in manufacturing industry


during the most recent 12-month period for which figures are available.

Mr. Canavan: asked the Secretary of State for Industry whether he will now take additional steps to increase investment in industry.

Mr. Molloy: asked the Secretary of State for Industry how much Government money has been committed from 1974 to the present date under industry schemes and how much investment it has generated.

Mr. Cryer: Total investment by manufacturing industry in 1977 is estimated to have been £1,761 million at 1970 prices. It represents an increase of 8 per cent. over 1976. This is a welcome increase, but we intend to maintain our active support for industrial investment, in particular our wide range of selective assistance. By the beginning of March this year, a total of £247 million of assistance had been offered by my Department since 1st April 1974 through industry schemes operated under Section 8 of the Industry Act 1972. The total industrial investment associated with this assistance amounts to £1,528 million. Since 1st April 1974 to 31st October 1977, £276 million has been offered under Section 7 of the Industry Act 1972 to assist 2,894 projects with a total project cost of £2,865 million.

Mr. Knox: As investment in manufacturing industry is substantially lower in real terms now than it was in 1974 when the Government came to power, what is the Minister doing to restore confidence in manufacturing industry and to increase demand for its products, without which the higher level of investment will not take place?

Mr. Cryer: The level of investment in 1977—at 1970 prices—was £1,761 million compared with £1,730 million in the last full year of the Conservative Government. Therefore, the level of investment has actually increased under this Government compared with the last year of the Conservative Government.

Mr. Canavan: Will my hon. Friend increase investment in the public sector? Will he utterly reject the disastrous industrial policies of the political con men in the Conservative and Scottish National Parties who are trying to fool the people

of Garscadden with promises of more jobs, yet they themselves voted to destroy thousands of jobs in the West of Scotland by voting against public ownership and public investment in the aircraft and shipbuilding industries?

Mr. Cryer: Public investment in industry is an important element in maintaining the competitive position of this country's manufacturing and service industries. There will be a test later today to see whether hon. Members are prepared to vote money for investment in the public sector of British manufacturing industry.

Mr. Molloy: Is my hon. Friend aware that his original answer is very disappointing for the Tory Party? What is important is that this is encouraging for the gradually increasing momentum in overcoming inflation and all the economic ills that are afflicting us. While this sort of programme and progress is welcome to Labour Members, it is always bound to be disappointing to the Conservative Party.

Mr. Cryer: I am grateful for the accurate remarks of my hon. Friend. He is quite right in saying that the economy is improving under this Government. Of course, many difficulties remain, but the reduction in the level of inflation and the improvement in the balance of payments situation is important and is reflected in the higher level of investment under this Government.

Mr. Ridsdale: In order to expand investment in manufacturing industry, will the Minister ensure that there is no prejudice against sources from abroad? Will he underline the wise words of the Minister of State on his return from Japan, that we would do all we could to encourage investment in this country, from whatever source it might come?

Mr. Cryer: The policy of the Government is to encourage inward investment, as the hon. Gentleman says, from whatever source it may come.

Mr. Tebbit: South Africa?

Mr. Kilroy-Silk: Will my hon. Friend accept that when handouts of public money are given to private industry the public has a right to know not only the total amount but the actual firms to which that money is given? Will he also accept that when public money is invested


in private industry we ought to take an equity stake in those companies?

Mr. Cryer: As I remarked earlier, under the Industry Act 1972, which was introduced by the Conservative Government, the money was given in secrecy to companies. The Conservatives were the people who held the cloak of secrecy over the publication of figures. In July 1974 this Government determined to move towards a more open position. In fact, the figures over £10,000 and £25,000 in certain categories are now published after payment in the weekly publication Trade and Industry.

Mr. Richard Wainwright: Is the Minister able to confirm that the Government accept that, in order to achieve a higher level of investment in manufacturing industry, everything that can reasonably be done to improve the rate of return on capital ought to be encouraged?

Mr. Cryer: As I remarked before—perhaps the hon. Gentleman did not hear my remarks—this Government have made generous tax concessions for investment in plant and machinery. We also give generous concessions in stock appreciation relief, in addition to the actual cash grants which we give under national schemes of regional assistance. This is an encouraging framework for investment in new products and jobs in industry in this country.

Mr. Watkinson: Is my hon. Friend aware that when the chairman of the National Enterprise Board gave evidence to the Public Accounts Committee he pointed out that there was a gap in the private sector of investable funds for smaller firms? Can he ensure that more funds will be made available to the NEB to regenerate that particular aspect of our industry? Can he say whether he himself has any plans to encourage investment in smaller industries?

Mr. Cryer: My hon. Friend will be aware that tonight there is the possibility of a vote, which I am sure my hon. Friends will be keen enthusiastically to support as that will give further financial assistance to the NEB. We are currently having a look at the provision of financial assistance to small firms. As my hon. Friend knows, the Secretary of State for Employment announced on 15th March that the Department will shortly be extending the small firms subsidy for 26 weeks,

cash assistance. Therefore, an examination is under way as well as specific action which is being undertaken by the Government.

Mr. Kenneth Clarke: Will the Minister undertake to study again the supplementary question of my hon. Friend the Member for Leek (Mr. Knox), who showed that in real terms the figures are very disappointing and that they underline the failure of a policy which heavily over-relies on the direct investment of taxpayers' money by the Government? Does he not agree that what is needed to revive investment in British industry is better levels of profitability, better market prospects and confidence? None of those has been provided at any stage by this Government.

Mr. Cryer: I am not all that surprised at the propaganda from the hon. Member for Rushcliffe (Mr. Clarke), but if he finds the current figures disappointing he must have been even more disappointed at the record under his own Government, because in 1972 the figures were lower and in 1973 the figures of investment were extremely low. It ill behoves him to make these churlish remarks. Could not the Opposition, for a change, instead of conducting a continual propaganda campaign against the achievements of the Government and the country, try to assess the position of the country objectively and recognise the real achievements of this Government?

Industrial Strategy

Mr. Norman Lamont: asked the Secretary of State for Industry whether he is satisfied with the progress of the Government's industrial strategy.

Mr. Varley: Yes, Sir. We now wish to see the valuable work which sector working parties are doing translated this year into effective action at company level.

Mr. Lamont: Is the Secretary of State aware that we noted with interest his speech last week in the course of which he said that the central aim of the Government's industrial strategy was to improve productivity? Since our average rate of increase in 1974, 1975 and 1976 was zero and only three countries in the entire OECD world did worse, how can he say that he is satisfied?

Mr. Varley: I am not satisfied with the level of productivity. Nor am I satisfied yet with the work to reverse the relative decline which has occurred in our manufacturing industry. However, the sector working parties and the industrial strategy have made a good start. They have the continued support of the Confederation of British Industry and the Trades Union Congress, and I think that the hon. Member for Kingston upon Thames (Mr. Lamont) should support them as well.

Mr. Madden: Does my right hon. Friend agree that Spillers dealt a blow to the Government's industrial strategy on Friday by announcing 8,000 redundancies? Does he not also agree that it is entirely in character with this company, which has been promoting its financial situation, that over recent years it has found it possible to donate £5,000 a year to British United Industrialists, a rabid anti-Labour organisation? Does he not agree, further, that this company—[HON. MEMBERS: "Too long."]—blackmailed the Government into accepting the position by saying that, if they did not do so, it would make 13,000 workers redundant instead of 8,000? Will my right hon. Friend issue a directive to the NEB to require Spillers French to maintain competition and employment in this important sector of industry?

Mr. Speaker: Order. This is not fair to other hon. Members. There is a Private Notice Question on the subject later.

Mr. Varley: I do not have departmental responsibility for the baking industry. I understand that a Private Notice Question is to be answered later today. But I can tell my hon. Friend—and I think that I reflect the views of my right hon. Friend who has responsibility for this company—that we were most disappointed at the way in which Spillers went about its activities, and I know that further consideration is being given to the matter.

Mr. Tebbit: Since the industrial strategy has resulted in more unemployment and lower living standards, why is the Secretary of State so cocksure that he has it right and that every other country has got it wrong?

Mr. Varley: I am not at all cocksure that this Government have it right, or anything of the kind. I am saying that the industrial strategy is designed to reverse

the relative decline in British industry—a decline which went on at a greater pace under the Conservative Government than it has under this Government. To single out the intolerable unemployment figures here and to suggest that they are unique is again a misrepresentation.

Mr. Bryan Davies: What does my right hon. Friend think of the industrial strategy of a company like Thorn Electrical Industries, which engages in the closest possible consultation with its work force and with Members of Parliament with constituency interests when a threat from Japan materialises but which announces in the most abrupt way, without any consultation, the closure of a major factory and a threat to a large number of other jobs?

Mr. Varley: I think that all companies which are in difficulty should consult the Government about how they propose to deal with those problems. That goes for Spillers, for Thorn and for any other company. My right hon. Friends and I deplore any arbitrary action which results in the sort of dislocation and hardship which have been created in this case.

British Shipbuilders

Mr. John Evans: asked the Secretary of State for Industry when he next intends to meet the chairman of British Shipbuilders.

Mr. Trotter: asked the Secretary of State for Industry when he next intends to have a meeting with the chairman of British Shipbuilders Ltd.

Mr. Kaufman: My right hon. Friend meets the chairman from time to time, but there are no plans for a meeting at present.

Mr. Evans: When my hon. Friend next meets the chairman, will he take up with him the case of Western Ship Repairers on Merseyside, which is faced with closure? Will he suggest to the chairman of British Shipbuilders that Western Ship Repairers should be taken into public ownership, as was intended in the original Bill?

Mr. Kaufman: This is a matter which really should be taken up with the Tory Party and the House of Lords. If Western Ship Repairers had been nationalised with the shipbuilding companies a year ago


when the Bill went through, British Shipbuilders would have been in a position to rescue that company from its problems. The trouble now is that the rot has set in so deep that it is very difficult to find a way out.

Mr. Arnold: When the Secretary of State next meets the chairman of British Shipbuilders, will he ask him why British Shipbuilders is now seeking to move into the manufacture of medium-speed diesel engines?

Mr. Kaufman: This is a matter which has been discussed very closely. British Shipbuilders intends at present to undertake work on medium-speed diesel engines in connection with the Polish order. It is work which would not have come to this country without the Polish order and which does not take work away from a single British worker. As for diversification, we fought this through during the passage of the Aircraft and Shipbuilding Industries Act, and Parliament decided that this publicly owned industry should have the power to diversify.

Mr. Blenkinsop: Will my hon. Friend recognise the important improvements in labour relations which are now being shown on Tyneside and see that there is as much publicity given to those improvements as there was before when we suffered severe setbacks?

Mr. Kaufman: My hon. Friend is quite right, and we hope that these very favourable indications will be noted. It is extremely important that we should do whatever we can to maintain employment in the shipyards on Tyneside.

Shipbuilding

Mr. Arnold: asked the Secretary of State for Industry whether he will make a further statement on the Government's proposal for support for the British shipbuilding industry.

Mr. Les Huckfield: Proposals for an extension of the Shipbuilding Intervention Fund are currently under consideration, and my right hon. Friend expects to make a statement as soon as the necessary consultations have been completed.

Mr. Arnold: Is it not the case that most major world shipbuilders are now

engaged in a competitive subsidy race which, if allowed to continue, can only result in the prolongation of over-capacity in world shipping? How can the Government justify the use of taxpayers' money to subsidise overseas ship owners to compete with the British merchant fleet?

Mr. Huckfield: I hope that the hon. Gentleman realises that if British Shipbuilders did not build the ships some other country would, and they would still compete against our own ship owners. But I am glad that the hon. Member has recognised that Belgium has a home credits scheme, that Denmark has a temporary interest subsidy, that France has a construction subsidy, that Germany subsidises ship owners, that Ireland helps construction losses and that many other Governments do much the same. The most significant feature is that this country did not contribute to the over-capacity.

Mr. Heffer: Will my hon. Friend ask the Minister of State to reconsider his answer about Western Ship Repairers in view of the fact that this will lead to a further increase in unemployment on Merseyside, which is already a very serious problem? Will he ask my hon. Friend, before he meets me and a delegation on Thursday morning, to consider further the idea of again pressing British Shipbuilders to take over this company, since it was promised at an earlier stage that this would be done if it could be done?

Mr. Huckfield: My hon. Friend is right to press his case, and I understand that he is seeing my hon. Friend the Minister of State very shortly. But I hope also that he and his hon. Friends will press their case inside the House and outside it, because I would hope that if we had in the Act the nationalisation of ship repairers we would not have been in this position.

European Regional Development Fund

Mr. Kenneth Clarke: asked the Secretary of State for Industry whether he intends to have further discussions with the European Commission on the future of the European Regional Development Fund.

The Minister of State, Department of Industry (Mr. Alan Williams): Discussions are still continuing at official level in order to resolve outstanding questions concerning the allocation and administration of the fund for the period 1978 to 1980.

Mr. Clarke: Does not the Minister agree that this fund would have been developed very much further to the great advantage of the British regions if the British Government had adopted a Community approach to this problem and, for example, ceased to insist that all payments should be made to the Government and not to the industries concerned? Will he say what steps are being taken to speed up the present discussions and whether the Government intend to support the proposal that some of the funds should be outside the national quota system, with direct payments by the Commission to industrialists who want to make the investments?

Mr. Williams: I do not accept the hon. Gentleman's interpretation. Before we allow a non-quota section to be set up, which would be outside the control of individual Governments, it is extremely important that we should ensure precisely for what purpose the money will be used and by what criteria it will be allocated.

Mr. Hoyle: Does my right hon. Friend agree that it is not much use having regional funds if our industry is undermined by foreign imports? What talks did he have in Japan with Japanese industrialists? Did he have talks about the GEC-Hitachi talks and the Rank-Toshiba merger talks, in view of the crisis in the electrical consumer industry?

Mr. Williams: My hon. Friend will appreciate that it is not the practice of the Department to reveal details of discussions with individual firms. I am sure that he will understand the circumstances. However, I took every opportunity to emphasise to the Ministry of International Trade and Industry, to business men and to the Japanese equivalent of the CBI the importance that we place on the Japanese recognising that trade has to be a two-way system and that if they want continued access to our markets they have to ensure that we get extra access to theirs.

Mr. Dykes: Will the right hon. Gentleman reconsider his rather negative answer

to my hon. Friend the Member for Rushcliffe (Mr. Clarke)? Should not the fund be much larger to enable it to make a significant impact in co-ordinated European terms to the less developed areas of all the countries, including Britain, and should not companies and local authorities be allowed to apply direct?

Mr. Williams: I do not wish to be offensive, but the hon. Gentleman seems to misunderstand. The fund's total size has already been decided, and within the fund will be incorporated the non-quota section. Even if we had agreed to a non-quota system at this stage, the sum would not be any larger. As I have said, the total sum has been agreed. There is still the critical question of sovereignty in regional policy, and regional policy has for far too many years dominated the thinking of British Governments. I shall not surrender power over regional policy, and I want to be sure that the House controls the regional development fund.

Merseyside (Investment)

Mr. Kilroy-Silk: asked the Secretary of State for Industry what further plans he has to increase industrial investment on Merseyside.

Mr. Alan Williams: Industrial investment on Merseyside qualifies for assistance at the highest level in Great Britain since it was made a special development area in 1974.

Mr. Kilroy-Silk: Does my right hon. Friend accept that Merseyside's already extremely narrow industrial base is being further eroded by announcements of closures and redundancies and that urgent action is desperately needed? Does he also accept that he should take into consideration the establishment of a Merseyside development agency, review regional policy and take on a major promotional campaign to point out the important features that Merseyside has to offer to industrialists, both in Britain and abroad seeking a location?

Mr. Williams: I understand entirely the strength of genuine feeling of my hon. Friend and his colleagues on this issue. It is important to bear in mind that the problem of Merseyside is not that we have been incapable of getting new jobs there. The difficulty has been our inability to save the jobs already on Merseyside. It


may come as a surprise to many when I say that last year 30 new firms established themselves on Merseyside. In the past two years we have let 37 factories. Vauxhall has been expanded by 2,000 jobs. At present YKK is expanding, and the Co-operative Bank is going into the area with 600 jobs. If only we were not losing industries in the area, the record would be satisfactory. The loss is substantially due to the world recession.

Mr. Heffer: Does my right hon. Friend agree that, despite all the tremendous and excellent efforts made by the Government to create employment on Merseyside, there is deep anger among workers on Merseyside, as expressed at the conference yesterday that was held by the trades council, during which it was decided to take a number of steps to bring the position to the Government's attention? Is it not clear that the private enterprise set-up has failed the nation and that we need to extend the publicly owned industries into Merseyside through the National Enterprise Board to set up the development and creation of new jobs?

Mr. Williams: As my hon. Friend is aware, we have only recently given extra powers to the NEB. It is entirely up to the board to decide how it wishes to allocate its resources. As hon. Members are aware, the board, under its guidelines, must take into account the unemployment needs and problems of regions. I am sure that the points that my hon. Friend and his colleagues have been making will be noted by the board.

British Leyland

Mr. Ronald Atkins: asked the Secretary of State for Industry what is the total of Government assistance that has been paid to the commercial vehicle manufacturing division of British Leyland.

Mr. Les Huckfield: The public funding of British Leyland has not been allocated by the Government or the NEB to particular operating groups in the way suggested by the hon. Gentleman. It is intended to meet a proportion of the company's overall funding requirements. My right hon. Friend is, of course, required to approve particular investment project costs over £25 million and has already approved two relating to commercial

vehicle manufacture: the new assembly hall and the new engineering centre, both at Leyland.

Mr. Atkins: Does my hon. Friend agree that the trading position as regards commercial vehicles is relatively prosperous? However, how long will that situation remain if Japanese cars assembled in Ireland are to be dumped in this country? What action will my hon. Friend take, together with his colleagues in the Department of Trade, to prevent that from happening? Will he take a leaf out of the Japanese book of trading tricks so that we may defend ourselves?

Mr. Huckfield: My hon. Friend is right. The truck and bus group has made a substantial contribution to making British Leyland Britain's largest net exporter. As regards Japanese cars and light vehicles, I can assure my hon. Friend that the understanding we have with the Japanese is that for cars and light vans their exports to us will stay the same as those for last year, and that no direct commercial vehicle imports will come into Britain. We are watching the situation closely.

Mr. Hal Miller: Should not the truck and bus group be treated separately? If it is successful, does it need further public investment? Could it not secure investment from the private sector?

Mr. Huckfield: The hon. Gentleman seems to be suggesting that we should hive off or sell off one of the more successful parts of British Leyland. I am wondering whether that is now the policy of the whole of his party. I remind him that the truck and bus division will be successful, because we have just approved an assembly hall costing £32 million, an engineering centre costing £34 million, a parts division costing £17 million and investment in Bathgate and Albion costing £50 million. These are all investments with public money.

British Steel Corporation

Mr. Gow: asked the Secretary of State for Industry what is his latest estimate of the prospective loss of the British Steel Corporation for the current financial year.

Mr. Kaufman: On 16th January my right hon. Friend exceptionally announced


an estimated loss for 1977–78 of £520 million, including a £50 million allowance for contingencies, which has fortunately proved not to be required. Present indications are that the outturn for the year will be a loss of around £440 million, but I would prefer to await the audited results before giving the House a firm figure.

Mr. Gow: Could not the new prospective loss of £440 million be reduced if the steel mills that are unprofitable and the steel mills that are grievously over-manned—some of which are in Labour marginal seats—received the sort of surgery that true efficiency requires?

Mr. Kaufman: If we chucked workers out of work overnight, as the hon. Gentleman wants in so many sectors of industry, we could reduce a great deal of losses. We could also destroy industrial relations stability in the British Steel Corporation. We could wreck the Corporation. However, that is a consequence of everything that the hon. Gentleman proposes in the House.

Mr. Michael Marshall: Does the hon. Gentleman recognise that both he and his right hon. Friend the Secretary of State tend to rely very much on historical figures when talking about losses? Is it not the case that action could have been taken earlier last summer if his Department's reporting systems were more effective, instead of which his right hon. Friend constantly says that he could not take action earlier in the year and that, in effect, he has to wait for the year ending?

Mr. Kaufman: One day we will get it into the hon. Gentleman's head that if we had taken hasty and arbitrary action to chuck workers out of work because of a prospective loss forecast four weeks into a financial year he and his hon. Friends would have been the first to criticise us—or maybe they would not, as they love unemployment so much.

Mr. Rost: asked the Secretary of State for Industry when he expects to announce his proposals for improving the productivity, competitiveness and profitability of the British Steel Corporation.

Mr. Kaufman: I would refer the hon. Member to my right hon. Friend's statement of 22nd March.

Mr. Rost: As the Minister has failed to answer questions on and refuses to claim any responsibility for the shameful bankruptcy and rundown of the steel industry, will he now at least admit that the industry's problems are due to its inability to compete in world markets against private enterprise industries abroad? Will he also admit that nationalisation in 1967 has done nothing to solve the problems but a great deal to aggravate them?

Mr. Kaufman: Changing the odd date and figure, the hon. Gentleman's remarks could apply exactly to Rolls-Royce, for whose nationalisation he voted.

Mr. Rost: That is no answer.

CIVIL LAWSUITS (SOURCE FUNDS)

Mr. Lee: asked the Attorney-General if he is satisfied with the effectiveness of the law relating to the disclosure of source funds provided for the conduct of civil lawsuits where the person or persons providing such funds have no recognisable interest in the lawsuits concerned, in the light of the comments recently made by the Honourable Mr. Justice Pain; and if he will make a statement.

The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): Yes, Sir. The Law Commission recommended in 1966 that criminal and tortious sanctions against the giving of financial or other assistance by persons who have no interest in the subject matter of proceedings should be abolished. That recommendation was implemented in the Criminal Law Act 1967, and my right hon. Friends have no proposals for further changes in the law.

Mr. Lee: My hon, and learned Friend will realise that this Question alludes to the activities of Messrs. Lewis and McCormick in Newham, North-East. Does he agree that the learned judge's remarks in one of those cases, which were couched in forceful terms, pointed to a very unsatisfactory state of affairs whereby all kinds of people, for questionable motives, shell out money to promote or maintain actions and that the persons concerned have their identities still undisclosed? The learned judge was most anxious that the identities of the persons concerned should be disclosed.


Ought not we to do something about them?

Mr. Davidson: I am well aware of Mr. Justice Pain's remarks, and I do not think that I can add anything to them. My hon. Friend will appreciate that there is no law which prevents those who have provided the funds from disclosing their identities. Equally, there is no obvious reason why they should not do so or wish to do so. If they do not wish or choose to do so, one is at least entitled to speculate what their motives are for so refusing.

Mr. Adley: Did the hon, and learned Gentleman hear the Prime Minister the other day deprecating the expulsion from trade unions of people for their political views? Is he aware that people who are expelled from trade unions face the possibility of action against one of the most powerful and wealthy organisations in this country and that, for instance, the ASTMS is trying to expel me for my political views? What are people in my position supposed to do when they cannot cope with the cost of such actions?

Mr. Davidson: With respect to the hon. Gentleman, I never regard him as one of the world's greatest authorities on trade unions. In any event, I cannot see what possible connection his supplementary question has with Mr. Justice Pain's remarks.

DIRECTOR OF PUBLIC PROSECUTIONS

Mr. Christopher Price: asked the Attorney-General when he next intends to meet the Director of Public Prosecutions.

The Attorney-General (Mr. S. C. Silkin): Quite soon.

Mr. Price: In spite of the fact that the Royal Commission has been appointed to look into a new system of public prosecution in Britain, is there anything that my right hon, and learned Friend can do in the meantime to tidy up the chaotic system of public prosecution in Britain so that, if the Royal Commission makes some radical recommendations, there is something for it to build on when that time comes?

The Attorney-General: My hon. Friend will be aware that, for the major part, the prosecution system is not within my control or responsibility. I am responsible for the Director of Public Prosecutions, and a major part of the prosecution system consists of the prosecuting solicitors and the police authorities. I entirely agree with what lies behind my hon. Friend's supplementary question. I think that our system is highly piecemeal. It requires to be rationalised. The Director, together with myself and the Home Office, is doing his best to try to effect improvements before the report of the Royal Commission, and I hope that we shall be able to do so.

Mr. Lawrence: When the Attorney-General meets the Director of Public Prosecutions, will he discuss with him the question whether his office is adequately staffed? Might it not make a substantial contribution to the reduction of crime at the present time, when the serious crime rate is alarmingly growing, if decisions were taken which would enable the Director's Department to initiate prosecutions more speedily than it is able to do at present?

The Attorney-General: I am grateful to the hon. Member for making the first of those two points. Indeed, when I see the Director, which is fairly frequently, the subject that he mentioned is often under discussion. The Director is endeavouring to improve matters. He has already had some success, but he knows that, if he needs my help in achieving further success in staffing, I am willing to help him as much as I can.

Mr. Skinner: Will my right hon, and learned Friend confirm that, in our anxiety to see that law and order matters are dealt with properly, the Poulson matters should be finalised? Has the Director of Public Prosecutions anything further to add upon the investigation with relation to Mr. Williams, who disappeared, and in respect of other matters, such as Lonrho? Can he tell us what stage has been reached there in respect of any prosecution and in any of the other related City scandals which have taken place over the last five years?

The Attorney-General: I made a statement to the House some considerable time ago on the Poulson matter. I have


nothing to add so far as concerns any person who was not embraced by that statement.
The Lonrho matter is still under investigation. On the last occasion of Attorney-General's Questions my hon. Friend asked me about certain other matters, and I have written to him telling him what the position is about those.

Mr. Biggs-Davison: Will the Attorney-General discuss with the DPP, who is also the Director of Public Prosecutions for Northern Ireland, with a view to representations in Dublin, the failure to extradite convicted prisoners who escape from gaol in Northern Ireland—a distinct matter from the protection given by Irish courts to wanted criminals asserting political motives?

The Attorney-General: I do not think that this matter arises out of this Question and it is not really a matter for me. But the hon. Gentleman's point has certainly been noted.

Mr. Watkinson: Has my right hon, and learned Friend discussed the case of Liddle Towers with the Director of Public Prosecutions recently? If he is successful in his application for opening the inquest on this case, and if new evidence is brought forward, will it be open to the DPP to consider the decision not to bring prosecutions?

The Attorney-General: I have not discussed the matter with the Director since the Director made his original decision that there was not sufficient evidence to justify prosecutions. It would be foolish for me to speculate about what would happen if there were a resumed inquest.

CONTEMPT OF COURT

Mr. Ryman: asked the Attorney-General when he expects to bring forward legislation to implement the recommendations of the Phillimore Committee on Contempt of Court, Command Paper No. 5794.

The Attorney-General: Not before the Government have had an opportunity to consider public and parliamentary reactions to the Green Paper on contempt of court which was published as a Command Paper on 22nd March.

Mr. Ryman: Bearing in mind that the original report was published as long ago as December 1974 and that three and a half years elapsed before the Government thought fit to publish a discussion paper, is my right hon, and learned Friend aware that the continuing delay in reforming this difficult and technical branch of the law is causing real difficulties to journalists and newspapers?

The Attorney-General: I agree with my hon. Friend that it is a difficult branch of the law. Because it is a difficult branch of the law and raises some difficult and sensitive quesetions, the Government considered very carefully before they decided that the right course was to isolate the particularly difficult issues by means of a Green Paper and nut them to the public and Parliament for discussion. It is part of the Government's process of open government. Less than three and a half weeks have elapsed since that Green Paper was published. We are hoping that we shall have the views of the House and of the public.

Mr. Percival: Can the Attorney-General do a little bit better than that? To call this open government makes words rather meaningless. The report was published in December 1974 and it has taken three years for a discussion paper to come out of it. I err on the side of conservatism because it is more than three years. How long will it be before something else happens? The Attorney-General has said that we must await parliamentary and public reaction. How long shall we have to wait for a chance to see what parliamentary reaction is? I see that the Leader of the House has arrived. Can he tell us through the Attorney-General when Parliament will have a chance to express an opinion about it? Can he offer hope of speedier action than is suggested by his answers so far?

The Attorney-General: The hon, and learned Gentleman always errs on the side of conservatism. I shall await with great interest his contribution to the debate which has been opened by my noble Friend the Lord Chancellor in his Green Paper. The Leader of the House has heard what the hon, and learned Member has said and he will no doubt take note of it in relation to the possibility of a debate.

SPILLERS FRENCH (BAKERY CLOSURES)

Mr. Radice (by Private Notice): asked the Minister of Agriculture, Fisheries and Food whether he will make a statement about the Spillers French announcement on Friday, 7th April on the closure of a number of bakeries involving about 8,000 redundancies.

The Minister of Agriculture, Fisheries and Food (Mr. John Silkin): Spillers Limited announced last Friday that it had decided to withdraw from bread baking. We understand that over the last six years its losses on bread making have amounted to £28 million. Spillers has decided that the only way in which it can continue as a sound and viable group is to give up bread baking altogether. The company is selling 13 bakeries to Rank Hovis McDougall and Associated British Foods. This will ensure that the jobs of 5,100 employees are maintained. But the closure of the remaining 23 bakeries means the loss of 6,370 full-time and 1,620 part-time jobs.
In order to complete this transfer the companies concerned needed to know whether a reference to the Monopolies and Mergers Commission would be made. Immediately before Easter, therefore, Spillers approached the Government in strict confidence, through the Bank of England, on this question.
After following the statutory procedures and in the light of the advice of the Office of Fair Trading, my right hon. Friend the Secretary of State for Prices and Consumer Protection decided, on the information before him, not to make such a reference. This decision took account of discussions between the Ministers concerned and the major baking companies in the course of which various points were clarified and a number of assurances given.
In particular RHM and ABF have given assurances that they will keep open the bakeries transferred to them for at least a year. They have said that they are taking over all the Spillers bakeries for which they can see a profitable future. They also expect, subject to agreement with the unions on working procedures, to recruit the equivalent of over 2,000 additional employees at their existing

bakeries, including those in Liverpool, Glasgow and the North-East.
The companies have said that the closures will not endanger bread supplies. ABF and RHM have stated that they do not expect to pre-notify a further price increase before late 1978.
It is clearly a matter for serious concern that the measures now taken involve sudden large-scale redundancies in a single firm. The Government greatly regret that they have not had more notice of the closures. But, having regard to the substatial over-capacity in the baking industry and Spillers' financial difficulties, Ministers concluded in the circumstances that the reorganisation proposed is probably the least unattractive of all the unattractive courses of action available.

Mr. Radice: I thank my right hon. Friend for that statement. Can he tell the House why Spillers gave such short notice of its withdrawal from the baking industry and the making of so many production workers redundant, including 700 in my constituency? Is my right hon. Friend aware of the impact of decisions such as these on areas with high unemployment? Will the Government see whether anything can be done to save any of the jobs?

Mr. Silkin: I sympathise with my hon. Friend and his constituents. I know that Birtley will have about 700 redundancies. My hon. Friend asked what could be done at present. The Secretary of State for Employment asked the Employment Services Agency to go into this at once and approached the other bakeries involved to see what can be done.
Spillers took the view that consultation with the unions could not have taken place without open debate. Spillers felt that this would lead to a loss of orders and would jeopardise its sources of finance and the whole deal, with even more adverse effects upon employment. I should have thought that if ever we needed justification for our belief in industrial democracy, we do not need it now.

Several hon. Members: Several hon. Members rose—

Mr. Speaker: This is a Private Notice Question but I propose, exceptionally, to call four supplementary questions from


each side—apart from the Front Benches—because of the interest that I know exists in this matter.

Mr. Fell: I wonder whether the Minister is aware of the statement which was made by the Secretary of State for Scotland on Friday in which he claimed that this came as a complete surprise to the Government? The right hon. Gentleman has now told us that the Government knew about this before Easter. What is the matter with the Government's liaison, apart from anything else? Can the Minister bring whatever pressure is possible to bear on Spillers to see that my constituents—about 750 of them—receive proper compensation for the loss of their jobs? Many of these workers have been in their jobs for over 20 years.
Will the Minister persuade the Secretary of State for Prices and Consumer Protection who is sitting next to him, to look again at a reference of the new set-up—which is almost a complete monopoly of baking and milling—to the Monopolies and Mergers Commission?
Does the right hon. Gentleman realise that I shall support the three bakeries unions at their meeting in Manchester later this week in whatever reasonable propositions they put forward to persuade the company that has now gone out of the bakery business to pay proper compensation to my constituents?

Mr. Silkin: Taking the first point, about my right hon. Friend's statement on, I think, Friday, I did not read him to say that at all. As I read what he had stated, what he said was that he deplored the lack of consultation with the unions. The fact is, in any event, that the Government were informed, as I pointed out in my statement, a couple of days before Easter. That really did not give very much time to come to any basis of restructuring.
However, I must tell the hon. Gentleman that I myself, last August—and I repeated it at the turn of the year—knowing that there were difficulties of overcapacity and of dropping demand in this industry, asked the Bakers Federation whether it would wish the Government to assist it in any way, with advice or in any other way in restructuring. I am still waiting for a response to that.
[Interruption.] I am the responsible Minister.
As to the question of redundancies and compensation, I think that the whole House would agree that proper redundancy payments must be made in this case, of course.

Mr. Cledwyn Hughes: In view of the substantial production capacity of Spillers, can my right hon. Friend give us an assurance that there will not be a shortage of bread in any part of the country as a result of this?

Mr. Silkin: Certainly there will not be a shortage of bread as a result of this, and I hope that there will not be a shortage of bread for any other reason. The fact is that even now the industry is still working slightly above capacity—although, it is true, only slightly.

Mr. Peyton: Does not the right hon. Gentleman think it a little odd that he should be answering this Question when the fingerprints of his right hon. Friend the Secretary of State for Prices and Consumer Protection are to be seen all over this miserable affair?
Secondly, may I ask the right hon. Gentleman to make the effort to recall the clear warning given by the Monopolies and Mergers Commission in July last year that the unprofitability of the bread baking industry was due largely to statutory price control and to other forms of official intervention?
Thirdly, may I ask the right hon. Gentleman whether he agrees that the inevitable consequence of all that, and particularly of his right hon. Friend's contribution to it, was bound to be the inability to invest, which would lead in turn to less competition, fewer jobs and higher prices?
Finally, does the right hon. Gentleman agree with the estimates made by the union leader responsible that this miserable development could well lead to an increase in the price of bread by up to 8p a loaf?

Mr. Silkin: Taking the last point first, I do not agree with it, and I do not agree with it for many reasons—one of them being that, in fact, as the balance of supply and demand will be much nearer, the unit costs of production, inevitably, will go down.
Secondly, Spillers will now have a very large amount of flour, for which previously there was an outlet within its own bakeries, which it will have to sell to other bakers. This and the fact that most supermarkets are now dealing only with two of the three bakers concerned lead me to assume that there will be no increase in bread prices. Indeed, the bakers themselves have said that they do not see it at least before the end of this year. Therefore, concerning this matter, I do not think that there is any difficulty.
Concerning the first point, I have noticed that my right hon. Friend the Secretary of State for Prices and Consumer Protection is very well able to look after himself and is capable of doing so. I have not the slightest doubt that had this Question been asked of him, he would have answered it. But the Question was asked of me.
As far as the other question is concerned, I do not blame the right hon. Member for Yeovil (Mr. Peyton). After all, he was not a member of his own Cabinet at that time. But the Price Code to which the Price Commission referred was the code introduced by the right hon. Gentleman's Government. If the right hon. Gentleman had listened to the statement—I hope that he did so—he would have realised that Spillers, in fact, said that it had been losing money for over the past six years. That takes us back to 1972 and well within the time of the right hon. Gentleman's Government.
The truth of the matter, as I say, is the fact that bread demand has dropped by 36 per cent, since the 1950s and, secondly, that there is over-capacity in the industry.

Mr. Peyton: Will the right hon. Gentleman at least recollect that he and his hon. Friends have been responsible for the last three years? Their performances as historians are not good. Their performance in office is very much worse.

Mr. Silkin: I should like someone to tell the right hon. Gentleman that the Price Code has been relaxed in those three years.

Mr. Ashley: Is my right hon. Friend aware that the arrogant and contemptuous action by Spillers Ltd, without any consultation, negotiation or discussion with

the trade unions, workers or Member of Parliament involved in sacking 8,000 workers, including hundreds in my constituency, should not be tolerated by a Labour Government, because it will embitter industrial relations throughout Britain? Therefore, what we on the Labour Benches want is, first, a recognition either that the jobs will be preserved or that alternatives will be found and, secondly, a full debate to uncover the secret negotiations that have been conducted by the company, certain Ministers of the present Government, the Monopolies and Mergers Commission and the Bank of England? I believe that these discussions should have been held in public and that the facts must be made known.

Mr. Silkin: As I told my hon. Friend the Member for Chester-le-Street (Mr. Radice) in my statement, the position concerning Spillers was that it believed, rightly or wrongly—I take no point on this at all—that if it had held a longer period of consultations, that would have meant the collapse of the whole of the Spillers' organisation, with a corresponding loss of employment of, perhaps, three times the amount. I make no comment on it, except to say that this was Spillers' view.
Concerning the discussions, my right hon. Friend the Secretary of State for Prices and Consumer Protection was the chairman of the Ministers who met the various groups. As I have told the House—and I have told the House absolutely frankly and clearly what happened—the aim was to get the proper assurances from the other companies that would be taking over some of the factories, and thus at least to safeguard some jobs, and, secondly, to raise this very question—which my right hon. Friend did raise—about consultation with the unions. I have told the House what Spillers' view was. Clearly, it is a matter for the House to make up its own mind whether this was right or wrong.

Miss Fookes: As the Plymouth bakery will not be one of those saved, will the Minister undertake to liaise with his right hon. Friend the Secretary of State for Employment and to have a statement made to the House in due course about the practical measures that will be taken to try to alleviate the unemployment caused?

Mr. Silkin: As I told the hon. Lady and the House earlier, my right hon. Friend has already set in motion the introduction of the Employment Services Agency, with all that that entails, into the bakeries concerned. I shall pass on to him what the hon. Lady has said.

Mr. Heffer: Is my right hon. Friend not aware that in Liverpool, for example, the district secretary of the bakers' union discovered this redundancy and closure while visiting another factory which had nothing to do with the company? The trade unions were never informed. Also, the 90-day notice which is supposed to be given under the law has not been given. These workers will be thrown on the streets within a few days. I cannot understand why this matter was not sent to the Monopolies Commission and I do not accept the excuses put forward by my right hon. Friends. Is it not time for the Government to think again and intervene again in this matter before it is too late? We cannot afford another 600 workers unemployed on Merseyside. It is just not good enough. It is time that the Government began to act positively in this direction.

Mr. Silkin: On the question about a reference to the Monopolies Commission, that is a very difficult decision which had to be made. My right hon. Friends who formed the group of Ministers concerned came to the conclusion that it was better to safeguard employment and indeed to get some back—

Mr. Heffer: What—in Liverpool?

Mr. Silkin: If my hon. Friend reads my statement when it appears in Hansard, he will see that I made special reference to Liverpool—

Mr. Heffer: How many of them?

Mr. Silkin: That I cannot tell my hon. Friend at the moment.

Mr. Heffer: Exactly.

Mr. Silkin: I am simply giving the reason why no reference was made to the Monopolies Commission. It was in an endeavour to obtain the necessary degree of employment. As for the 90-day notice under the Employment Protection Act, that Act was designed among other things to give that sort of notice. We did not want the old days back again. I understand

that. However, whether there was a breach of that or not is a question of law. Obviously, Spillers took its own legal advice and came to its own conclusion. It is not for me to intervene on that matter, because it is a matter of law.

Mr. Grist: Does the right hon. Gentleman realise the bitter effect that this closure will have in my constituency in Cardiff, coming as it does, on top of the closure of the East Moors steelworks? Will he comment on the likely difference between the compensation paid to redundant steelworkers and that paid to those made redundant by Spillers?

Mr. Silkin: I should not very much like to comment on it, beyond saying that in my experience Government and nationalised industries are very good employers.

Mr. Ryman: Can my right hon. Friend say more clearly why a deliberate decision was taken not to refer this matter to the Monopolies Commission, bearing in mind the overall criterion for referring such matters—the public interest?

Mr. Silkin: I hope that my hon, and learned Friend heard me say that this was a very difficult question. But my right hon. Friends were determined to safeguard as much employment as possible. That was the basic element in the whole of their decision, and that seems to me to be absolutely right.

Mr. Pardoe: Does the right hon. Gentleman accept that this decision was due mainly to the reduction in bread sales brought about by a change in national taste and exacerbated by recent industrial action? Will he also note that, as a result of that reduction in bread sales, Spillers has become a lame duck and that the Conservative Party, through its Front Bench today, is supporting the sustenance of lame ducks?

Mr. Silkin: I thought that the view of the Opposition was to attack the Government whenever they acted properly, as they have on this occasion, in my view. But I take the hon. Gentleman's point. As I said, there has been a 36 per cent, reduction in the demand for bread since the 1950s. That has led to a great deal of over-capacity and perhaps, as it were, to over-competition. So in that respect the hon. Gentleman is perfectly correct.

EUROPEAN COUNCIL (COPENHAGEN MEETING)

The Prime Minister (Mr. James Callaghan): With permission, I should like to report to the House on the meeting of the European Council in Copenhagen which I attended at the end of last week with my right hon. Friend the Foreign and Commonwealth Secretary.
The Council expressed to the people of Italy its distress at the cruel abduction of Signor Aldo Moro in Italy. There was agreement on the need for close co-operation among the Nine in countering terrorism and to reach conclusions on the proposals put forward by President Giscard with the aim of improving judicial co-operation among the member countries.
The nine Foreign Ministers, meeting separately for part of the time, reviewed a number of current international problems, including the current position in the Middle East. The Council deplored all recent acts of violence in this area and the events in Southern Lebanon and expressed support for the new United Nations Force and for the integrity of the Lebanon. The Council emphasised that the momentum of the peace process in the Middle East should be maintained with a settlement based on Security Council Resolution 242 in all its parts and on all fronts.
A statement was issued by the Council supporting efforts of the five members of the Security Council to bring about a peaceful solution in Namibia. My right hon. Friend the Foreign and Commonwealth Secretary gave an account of recent developments in Rhodesia and the Council expressed their continuing support for a satisfactory solution based on the principles of the Anglo-American plan.
On Community affairs, the Council agreed that the legislative procedures in the member States were sufficiently advanced to select the dates of 7th to 10th June 1979 for the first direct elections to the European Assembly. Each member State will choose its customary day of the week. For Britain that would be Thursday 7th June 1979. The Council adopted a declaration on democracy reaffirming the link between membership of the Community and the observance of democratic

principles, which is valid for both present and future member States.
Following the "Amoco Cadiz" disaster on the French coast, the Council called on member States to adopt common attitudes in preventing pollution of the sea and in particular to co-ordinate action on compulsory shipping lanes and on effective control over vessels which do not meet the minimum standards for the operation of ships.
It was agreed that a European foundation should be established, in Paris, to promote cultural and other contacts within the Community.
The main focus of our discussions, however, was the unemployment of both human and material resources within the Community. The growth rate of the Community during 1977 was 1·9 per cent, and it was agreed that we should develop a common strategy designed to reverse this unsatisfactory situation. The strategy should cover five broad areas—economic and monetary affairs, employment, energy, trade and relations with the developing world—similar to those I recently suggested to President Carter, as areas in which the industrial world needs to take collective action. It is the Council's view that agreement in these fields would be an important contribution to world economic recovery, higher economic growth and the creation of new jobs. The Council laid stress on the need to prevent inflation as part of the same objective.
It was decided to aim for a Community growth rate of 4½ per cent, by the middle of 1979 and to define the margin of manoeuvre that would be open to member States as a result of co-ordinating their actions. The possibilities should be known when the Council next meets in Bremen in July. It was agreed to recommend a doubling of the capital of the European Investment Bank.
An improvement in the general employment situation would be a key objective of such a common overall strategy. The Council agreed to examine whether work-sharing measures should have a supplementary part to play in alleviating the present grave employment problems.
There was a discussion on the European aspects of what are called "industries in distress" and agreement to set up tripartite committees on a European


basis made up of Governments, employers and trade unions to overcome the serious problems of structural overcapacity and to restore the industries to world competitiveness.
Work is being set in hand on these matters and on the imbalances of current account surpluses and deficits which lead to currency instability, as well as on measures to reduce demand and increase supplies of energy in the Community. It was also recognised that there is a need to reach a successful conclusion on the present multilateral trade negotiations and for an increase in capital flows to the developing countries.
It is intended that conclusions on these matters should be reported to the next European Council in Bremen early in July. This meeting will be followed by an economic summit between the United States, Canada, Japan, Germany, France, Italy and the United Kingdom in Bonn on 16th and 17th July. It will thus be possible to present a European dimension to the wider summit. I am glad to say that the agreed statement announcing the wider summit also recognises the need for concerted and mutually supportive action in the main areas I have mentioned, and the participants agree to develop their policies so as to take account of this, both in preparing for the July meeting and in any action they take meanwhile. The Budget to be introduced by my right hon. Friend the Chancellor of the Exchequer tomorrow will take this into account.
This recognition of common purpose must now be reflected in the work that will take place and must lead to concrete action in the coming months and at the July summits. The discussions so far held with Heads of Government within and outside the Community have now to be made effective by policy measures which taken together will offer the best chance of bringing about a change in the direction of the world economy and an improvement in world confidence.

Mrs. Thatcher: The Prime Minister has made a very long statement and it would neither be possible nor desirable for me to comment on each and every point, especially as much of it will be the subject of debate later in the week. I shall confine myself, therefore, to my usual few points.
First, is the Prime Minister aware that we welcome any strong action by Governments which will bring terrorists to justice and which will prevent further violent acts of the kind which we are seeing far too often in Europe, that we welcome the setting of the date for the direct elections, and that we welcome the declaration of democracy which makes it clear that there is no room in Europe for any one-party State?
Secondly, as there appears to have been a great deal of discussion on international currency and exchange rates and a good deal of confusion—indeed, contradiction—in the reports, it would be helpful if the Prime Minister could clear up some of that confusion and, in particular, if he could say whether there is any change in the Government's policy of allowing exchange rates to float either against all currencies or specifically against those of our Community partners.
Thirdly, will the Prime Minister say whether there has been any change in the very firm view taken at the Downing Street Summit—I am aware that it was of a different composition—against trade protection? He will remember that at the Downing Street Summit there was a communiqué which said that protection would foster unemployment, increase inflation and undermine the welfare of our peoples. Is that still his view about a country which exports as much as we do?

The Prime Minister: I am obliged to the right hon. Lady about what she had to say on the question of terrorism and its suppression. The Bill concerned with the suppression of terrorism, which is now going through Parliament, will, I hope, be of assistance in this matter.
As regards exchange rates, as I think that the House is aware through Press briefing, the President of the Commission and others have put forward proposals. Copenhagen is a rather ill-omened place for such proposals, I seem to recall. However, we should examine everything and anything that is put forward that would lessen the turbulence in the exchange markets. I should be very happy to do that, but we must be clear that lessening the turbulence in the exchange markets does not of itself either promote or reduce unemployment. Present Government policies continue to exist. Ideas are always being bruited about and they should be


examined, but there is no more to it than that at present.
As regards trade protection, I found a growing concern among a number of Heads of Government about this matter, to some extent caused by the previous point that the right hon. Lady raised—the turbulence in the markets either forcing up some currencies or forcing down others—and to some extent because of the transfer of technology from the advanced industrial world to the developing countries. It would be profoundly politically dangerous if we were to use protection as a defence against that consequence, but it is throwing up new problems for the middle 1980s. Studies are beginning on that.
For the meantime the right hon. Lady knows my view—I have expressed it often enough—that a country such as our own which exports so much of its products must be extremely careful in any measures of protection that it would be asked to consider.

Mr. Gould: Can my right hon. Friend confirm that we are not likely, either as a move towards economic and monetary union or otherwise, to re-enter the currency snake? Will he also agree that any efforts to re-establish stability in world currency markets should be made in conjunction with the United States, Canada and Japan?

The Prime Minister: I am not aware of any proposition to the effect that we should re-enter the currency snake. I have expressed my view to President Carter that, if at all possible, it is far better that we should regulate the currency markets on a world basis including the dollar rather than excluding it from our consideration.

Mr. Powell: In the context of countering terrorism, was any progress made in reducing the role of the Irish regime as a base for the conduct of terrorist operations in the United Kingdom?

The Prime Minister: I had discussions with the Prime Minister of the Republic of Ireland in the margins, but we did not discuss it in the terms that the right hon. Gentleman has put this afternoon. I think that the sensitivities of the matter are well known. It is the task of the British Government to ensure that terrorism in the North of Ireland is put down and at the

same time to maintain good relations with the Republic of Ireland, which is co-operating with us in doing so.

Mr. Roper: Did my right hon. Friend and his colleagues on the European Council review the state of progress of the Community's negotiations with Japan over trade matters, and, if so, were they satisfied with the state of negotiations?

The Prime Minister: No, we were not satisfied with the state of negotiations. The Japanese surplus looks like being extremely large again during the current year. That in itself is bound to make for greater problems in securing some stability in the currency markets. The Commission has therefore been asked to take the matter up again with the Japanese and a further report will be made to the next European Council at the beginning of July.

Mr. Thorpe: Does the Prime Minister agree that the Community is the only world trading Power which has its own internal world exchange rate difficulties? Therefore, was consideration given to pooling part of the reserves of the Nine, possibly in the European Monetary Fund, to act as an exchange stabilisation fund? Was any consideration given to producing a new unit of account which would be a parallel European currency which could be used on a voluntary basis? Was there a determination to harmonise the rate of coverage of VAT? Does not the Prime Minister agree that all of these would produce a degree of stability which would produce investment which would bring in new jobs?

The Prime Minister: It is clear that the exchange rate difficulties in Europe spring from the fact that we have nine sovereign countries. However, to obliterate exchange rate difficulties does not necessarily mean that there would be an equal rate of growth throughout all parts of the area concerned. If it were so, the Lehigh Valley in the United States would be prospering as much as Texas. Therefore, we have to be extremely careful in trying to find a solution to these problems. I cannot say that there were any discussions at Heads of Government level about the proposals that the right hon. Gentleman put forward, though I am sure that discussions are going on—and rightly going on—about these matters, because


we wish to overcome them, if that is possible without hampering our own economic progress.

Mr. MacFarquhar: In view of what my right hon. Friend said about difficulties with Japan, would he consider suggesting to the next summit at Bremen that, in addition to the now regular confrontations between trade Ministers and trade commissioners and their Japanese equivalents, it would be advisable for European Heads of Government to meet regularly with the Japanese Prime Minister in order to extend the range of contacts and, perhaps, avoid these confrontations?

The Prime Minister: I have been in communication with Mr. Fukuda, the Japanese Prime Minister, to explain to him the thoughts I have had about trying to get a collective agreement on a number of issues which, whilst individually not very attractive to the countries which would be asked to undertake them, taken together might create a greater atmosphere of confidence. We shall be meeting Mr. Fukuda when the summit meets in Bonn on 15th and 16th July, but discussions will go on before then, too.

Mr. Fletcher-Cooke: Reverting to the question of European solidarity against terrorism, is the Prime Minister aware that in the European Parliament the Irish delegation was equally solid with all others in a unanimous vote that all members of the European Community should ratify the anti-terrorist and anti-hijacking conventions? In his conversation with the Prime Minister of the Republic of Ireland, did the right hon. Gentleman remind him of this and ask him what proposals the Prime Minister of Eire had for ratifying this convention, Eire being the only member of the Community that has not so far done so?

The Prime Minister: I did not raise this matter with the Prime Minister of the Republic. I think he is aware of our position on this matter and he will know what force of international opinion is playing upon the Republic, but it is for him to take a decision.

Mr. John Mendelson: When the Prime Minister and Heads of Government discussed the problem of terrorism, were they made aware that at about the same time the International Air Pilots Association

was publishing a very firm declaration requesting action against hijacking and that it decided in principle that if such action were not to be taken by Governments in the near future, the pilots would themselves take action and pronounce a boycott against countries which did not take action against hijackers or allowed them to organise their terrorist activities within their territory? Have the Heads of Government any attitudes in the near future to take on this important problem?

The Prime Minister: That matter was not discussed, although I read of it in the public prints. This will be taken account of by those who have still to take action on the ratification of the Act concerned.

Mr. Dykes: Is the Prime Minister aware that his new-found enthusiasm for EEC economic solidarity is much to be welcomed in all quarters? Since he had to concede last Thursday that the real rate of unemployment in this country is much higher than in the other European member States, pro rata, what specific anti-unemployment proposals did he make in the context of those economic discussions?

The Prime Minister: The comparisons that are constantly being made across the Floor of the House always neglect the fact that the increase in unemployment since 1973, which is the measuring rod that I take, has been as great—or greater—in some other countries as it has been in this country. But I think that we are all agreed that the tendencies in all the countries are the same. Some are at a different stage in the process, but the tendencies are the same and the prospects for unemployment in the 1980s will cause all countries the greatest concern.
It was for this reason that we discussed the possibilities, or asked our colleagues to discuss them, of, among other things, work-sharing and the creation of jobs in other ways. I hope that there will be a more detailed report in July.

Mr. Alan Lee Williams: I warmly welcome the Prime Minister's statement about the foundation of the European cultural organisation. Will he say something more about this and agree to place in the Library further details of this organisation?

The Prime Minister: Yes, I shall consider what can be placed in the Library. The details have to be worked out. It was a proposition that came from Prime Minister Tindemans' report some time ago. I am glad that it has been adopted. There can be no harm, whatever view we may take about the Community, in getting to know the other people of Europe better.

Mr. Marten: Is the Prime Minister aware that since July 1975 there have been nine summit meetings and that each communiqué that I have read has mentioned unemployment and growth? Yet precisely nothing seems to have happened. Does it not illustrate the ineffectiveness of this type of co-operation, welcome as it is?
Secondly, on Rhodesia, noting that our partners in the Community support the Anglo-American initiative, can the Prime Minister say why it is that he never takes up in that circle of friends the question of sanctions busting by our partners in the Community? I know that the matter is taken up in the United Nations. Why is it not taken up in the Common Market itself?

The Prime Minister: The hon. Gentleman has a point, though I would not say that those discussions are ineffective. It illustrates both the common nature of the problem that surrounds the Western world at present and the difficulty of finding a solution, because all the countries concerned want to find a solution if they can. I do not know that we have yet found a solution. I am not ready to sit back and do nothing about these issues. That is why in my own way I have been trying to put forward a collective plan for concerted international action. I hope that it can succeed. However, it illustrates—the hon. Gentleman is quite right—the profound difficulty into which the Western world has fallen, in particular since 1973.
On sanctions busting in Rhodesia, I have not always said so, but I have raised the matter, more particularly when I was Foreign Secretary, at the Council of Foreign Ministers and brought a number of illustrations to the attention of the Council of Foreign Ministers. Action was taken after that. I shall bring the hon. Gentleman's question to the notice of my right hon. Friend.

Mr. Skinner: When my right hon. Friend went to Copenhagen did he tell them that since we have been writhing with this European cobra we have paid, in total, £3,000 million in relation to subscription, trade deficits and so on? Did he point out that unemployment has doubled in this country—and, for that matter, in many others inside the Common Market—since 1973? Did he also remind them of the terrible inflation that this country has suffered partly through being in the Common Market? Did he deal with those matters?
Does he understand that the British people are yearning for him to raise the question of the Common Market once again, not in terms of whether it can solve the unemployment problem collectively but in terms of whether he is big enough to say that the matter has not been finally settled?

The Prime Minister: Some of my hon. Friend's questions were raised by me. For example, the United Kingdom will, I think, this year be the second largest net contributor to the Community after Germany. This, in my view, is not a satisfactory position, because the common agricultural policy is neither in the interests of Europe as a whole nor in the interest of Britain, and there should be reforms. It seems to me that the balance is all wrong when so much of the funds of the Community are devoted to supporting agricultural surpluses that are not needed at a time when there is such great unemployment throughout the Community
On inflation, with respect to my hon. Friend, that is more due to the levels of the money supply in the early years of the 1970s than it is to our entry into the Community. However, he need have no doubt that, within the general ambit of the decision of the British people. I shall pursue British interests on all these matters as forcefully as possible, as I find all my colleagues do.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: If the hon. Members who have been standing are brief, I hope to call them all.

Mr. Biffen: In respect of currency exchange, is the right hon. Gentleman aware that there is nothing so turbulent


as a Government forlornly trying to defend a fixed rate which has parted from market reality? Will he remind the President of the Commission that the House is sufficiently jealous of its ability to decide what are the appropriate patterns of taxation for this country and to hold the Government accountable for the control of money supply that it will not lightly trade in either of those for some scheme of economic and monetary union?

The Prime Minister: I do not think that that is a complete analysis of the situation. Of course, it is axiomatic that one cannot defend a fixed rate if it is unreal. The hon. Gentleman seems to be neglecting the great force of the market today, especially in the Eurodollar area, in which the currencies sweeping across the market can create conditions against the level of a currency which are totally unrelated to what should be a competitive value. I hope that the hon. Gentleman will not be so wooed by market forces that he will say that we should stand helpless in the face of these gales. If so, I totally disagree with him.

Mr. Faulds: Will my right hon. Friend contemplate whether it is not time that he and others of his colleagues among the leaders of the Nine adopted the sensible and responsible attitude of Chancellor Schmidt in declaring that the Palestinian people have the right to self-determination?

The Prime Minister: The British Government's view of this matter and the view of the Nine is well known. It would be as well to stand by the formula that is now being worked out in the Middle East and with the United States on the position of the Palestinians in determining their own future. I do not think that we should go out individually and severally on this matter. The combined efforts of all the Nine are more likely to yield better results than if each of us states his own personal position.

Mr. Gow: As the Prime Minister of the Irish Republic was present at the conference in Copenhagen and as the issue of terrorism was on the agenda, and as terrorism is being mounted against the United Kingdom from the Republic, is it not inconceivable that the

Prime Minister can tell the right hon. Member for Down, South (Mr. Powell) that the issue of terrorism from the Republic was not even discussed by the Irish Prime Minister with the English Prime Minister?

The Prime Minister: That is not what I said. Nor is it what I meant. I think that the House is well aware of the nature of our relations with the Republic of Ireland, and those relations will not be helped, in a situation in which the Republic is as opposed to terrorism as we are, if people such as the hon. Gentleman try to stir up trouble between the two countries.

Mr. Watkinson: Can my right hon. Friend clarify the 4½ per cent. growth rate? Is it the intention that member countries should aim for that growth rate individually or will it be an average growth rate? If that be the case, does it not imply that certain countries will have to grow much faster than others? Can my right hon. Friend say what is the attitude of the West German Chancellor to these matters, as that is pivotal to the growth of Europe?

The Prime Minister: This would be an average growth rate to be aimed at. As the House will see from the figures I gave, it would mean a large increase, considering that the average growth rate in the Community was only 1·9 per cent. during last year. [HON. MEMBERS: "What was ours?"] Ours was lower. I invite the House to await the Budget tomorrow. Let us see what it contains. I shall be as interested as anyone else.
As for the future growth rate of 4½ per cent., this is an average for the Community as a whole. It clearly implies some countries going ahead faster than the average and some slower. The West German Chancellor is quite clear about this point. He wishes the German economy to grow as fast as it can. What he is perhaps more sceptical about than some others is how far it can be persuaded to grow. That is one of the areas in which there will have to be discussion between now an the summit in July.

Mr. Alan Clark: Is the Prime Minister aware that his somewhat qualified comments on protectionism have been noted? Does he not agree that there is a case at least for protecting


the livelihood of Her Majesty's subjects against imports from areas which are themselves, in one form or another, highly protectionist and take very little from us in exports?

The Prime Minister: There should be no ideology about this. It should be a matter of practical, cold, hard calculation. That is what Her Majesty's Government will apply to every case that comes in front of them. In the matter of the textile industry, for example, it was possible through the Multi-Fibre Arrangement, with our other Community colleagues, to reach an agreement that has been of great value to this country—I would guess probably better than we could have achieved if we had negotiated individually. We should take each case on its merits.

Mr. Christopher Price: Is my right hon. Friend satisfied that all obstacles to direct elections are now removed? Did the Prime Minister of Luxembourg repeat his suggestion that he might not complete the final formalities until he had received a guarantee that Luxembourg would remain the seat of the Assembly in perpetuity? Does not my right hon. Friend think that it is rather silly for the European Assembly to build spec-built parliaments all over Europe which give it a reputation for extravagance and not first decide where its seat should properly be, which is in Brussels?

The Prime Minister: The Prime Minister of Luxembourg did not raise this matter. As for the legal position regarding the date, all the proper decisions have not yet been taken. The Bill has still to complete its progress through the House. Then it will be necessary to ratify the decision under Article 10 of the Council Act. That will require another action by the House. Other countries have to do the same. I believe that only Denmark and Ireland have so far completed all the procedures.
The decision taken on Saturday was a political decision in the sense that we thought that the progress that had been made justified fixing a date in the middle of 1979. But the legal procedures have still to be completed.

Mr. Ridsdale: As the Japanese position will be extremely important at the summit, may I press on the Prime Minister

the need for more intensive private diplomacy and not so much public diplomacy? Does he realise the danger that so many people are trying to make political capital out of the matter and making the Japanese the scapegoat for some of our ills?

The Prime Minister: Yes, Sir, but the hon. Gentleman and I live in a rather old-fashioned world. Nowadays it seems to be important that everything should be publicly known at the earliest possible opportunity, no matter what the consequences may be for any discussions that have taken place.

Mr. Madden: Does my right hon. Friend agree that the European textile industry needs further attention, bearing in mind that only last week a Common Market agency forecast 1·7 million redundant European textile workers by 1985? If the Common Market is unwilling or unable to protect the British textile industry against grossly unfair imports, is there not a need for Britain to act and to impose selective import controls to protect this vital industry?

The Prime Minister: As I am sure my hon. Friend will know, because he is a great expert on this matter and follows it very closely, there is no evidence for his proposition. Indeed, the evidence is to the contrary, that we got a very good deal out of the last round of the negotiations. I find no complacency on the part of my colleagues, the Heads of Government, about these issues. It is a question of the right way to tackle them. In the case of a number of industries about which we are deeply concerned at present—steel, shipbuilding, textiles, clothing, footwear and others—the same problems are being repeated throughout Europe. I can see every advantage in having discussions and consultation and maybe decisions taken on a common basis if it will help us all.

Mr. Ioan Evans: In view of the high unemployment in all the Common Market countries, the fact that this was the main item on the agenda will be welcome. Will the Common Market leaders be making positive proposals to the summit conference in July for dealing with structural unemployment? What machinery will be set up to monitor the increase in economic growth that is proposed?

The Prime Minister: The Economic Council has been asked to take this matter into account, together with the tripartite committee that already exists among trade unions, Government and employers, to report to us in July. A further conference of all three groups will be held in September. But I believe that it we are to get movement on this and on economic growth, we must get movement on the other factors that I have outlined as well. We shall not get anything done individually. There must be a collective decision for united action. I do not know whether it will succeed, but I think that it is the best prospect that we have.

NATIONAL ENTERPRISE BOARD (CAPITAL REQUIREMENTS)

4.27 p.m.

The Secretary of State for Industry (Mr. Eric G. Varley): I beg to move,
That the draft National Enterprise Board (Financial Limit) Order 1978, which was laid before this House on 3rd April, be approved.
The order is to increase the National Enterprise Board's financial limit from its present level of £700 million to the level of £1,000 million provided for under Section 8 of the Industry Act 1975.
I understand that it will be for the convenience of the House if we discuss at the same time the other motion in my name:
That this House authorises the National Enteprise Board on the direction of the Secretary of State, given under section 3 of the Industry Act 1975, to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972 (as amended by section 22 of, and Part 1 of Schedule 4 to the Industry Act 1975, and section 1 of the Industry (Amendments) Act 1976) sums to British Leyland Limited or any of its subsidiaries not exceeding in the aggregate £150 million, being sums in addition to the £30 million previously paid by the National Enterprise Board to British Leyland Limited under that section 8.
These measures are necessary in order that the National Enterprise Board may meet the capital requirements of British Leyland and the other companies for which it is responsible, as well as undertake its wider statutory purposes. In its votes today, the House will be directly influencing the livelihoods of hundreds of thousands of the electorate and their families. The total number employed in companies in which the NEB has a stake is over 330,000. I am very pleased that the right hon. Member for Lowestoft (Mr. Prior) will be taking part in the debate as the Opposition spokesman on employment matters. Additionally, about 90 Members of Parliament have a direct constituency interest in the votes tonight.
We clearly cannot debate the Board's finances without devoting the major part of our time and attention to the largest NEB company, British Leyland. I shall have something to say about the other NEB interests later in my speech.
British Leyland is enormously important to this country. At the end of 1977 there were over 170,000 employed in that company, of whom 130,000 worked for


British Leyland Cars. This is simply the direct employment in the United Kingdom. If we add the number of people dependent on British Leyland in the components and supplying industries, we have at the very least twice as many. If we also include the numbers of people whose jobs depend on the spending power of Leyland workers, the number is bigger still.
Even more important, perhaps, is the concentration of jobs at stake in particular areas, particularly the West Midlands and the South Midlands. The collapse of British Leyland or British Leyland Cars would make the Midlands an industrial wasteland. But British Leyland also makes a substantial—

Mr. Eddie Loyden: Will my right hon. Friend give way?

Mr. Varley: I am sure that I am coming to the point which my hon. Friend wishes to raise, and I think I had better get on. I was saying that British Leyland makes a substantial contribution also to the economies of Scotland and Wales. It has about 10,000 employees in Scotland and over 5,000 in Wales.
Last year, British Leyland's exports totalled over £850 million, which makes it the largest net exporter in the whole of United Kingdom manufacturing industry in recent years. What is more, although British Leyland has only about one-quarter of the United Kingdom car market, it still provides over half the total number of cars produced for export in the whole of the United Kingdom and in terms of value the proportion is even higher. Its contribution to import saving is more considerable. British Leyland Cars expects to sell over 400,000 vehicles in the domestic market this year.
The strategy summarised in the National Enterprise Board's report to the House is the result of the fresh look which Mr. Michael Edwardes and his team have been giving to the prospects for the company over the next few years. Neither the chairman of the National Enterprise Board nor I gave Mr. Edwardes a special remit or terms of reference except in one respect. We told him that the plan had to be realistic.
The detailed targets that the company has set itself for 1978 are achievable, but the prospects for the period beyond need

to be looked at, of course, with caution. The National Enterprise Board has, however, decided that, if the company can recover its position over the next couple of years and return to health in the 1980s, there should be no problem about finance in the years following the plan period.
The Government's objective remains unchanged. British Leyland should become a viable manufacturer independent of public funds in the 1980s.
I shall now detail the financial proposals. During the period since we rescued British Leyland up to the end of last month the company has borrowed a total of £150 million of the £1,000 million envisaged by the Ryder plan. The poor performance in the cars business in 1977 has meant that the company has failed to generate significant funds of its own for new investment, and the required level of expenditure on new plant, facilities and models which is needed to put British Leyland on a viable footing can be met only by the provision of public investment on the scale envisaged by the Ryder plan. The Government's view is that there is no point in this situation in making do with half measures.
In the period from last March to late March 1978, British Leyland received only £50 million from public funds. The National Enterprise Board decided last October, quite rightly, that it should not make available even the remaining £50 of the £100 million approved last July until the new board of British Leyland had put forward its own corporate plan. These sums are clearly inadequate to sustain the investment needed by any company with ambitions to remain a substantial volume car producer.
Even the provision of £450 million, which the National Enterprise Board has determined, after careful consideration, is the sum required for 1978, means that some desired programmes have had to be cut back—for example, the foundry modernisation programme. In deciding to make this money available in equity form, the Government have accepted the National Enterprise Board's view that there is an immediate need to strengthen the balance sheet by establishing a more satisfactory debt-equity ratio.
Clearly, Government backing in the form of a major equity injection will make it easier for British Leyland to meet


its additional requirements from the banks rather than from the public purse, and it is highly desirable that British Leyland should be in a position, where it can, to look increasingly to private sources for those of its financial requirements which cannot be met by funds generated internally.

Mr. Ian Lloyd: The right hon. Gentleman has said that so far about £50 million has been invested by the taxpayer to sustain the investment of British Leyland. One matter which troubles the House and, I am sure, troubles the country is the question of what proportion of this money has actually been invested by British Leyland in new capital projects as opposed to being used by the company to support and sustain its wage bill. I am sure that our attitude towards all these future proposals will be very much conditioned by what the Secretary of State has to say about that.

Mr. Varley: Not all the £150 million has been used for capital investment. That has been made clear on previous occasions. I do not have the actual breakdown of the figures with me, but I can arrange for the hon. Gentleman to receive the figures in due course. I want to come on to that point because I agree that it is crucial. The provision of further loan money now, whether from private or public sector sources—this is the essential point of putting the £450 million in equity form—would merely have added to the interest payments burden at a time when only modest profit can be expected during the next two or three years.

Mr. Norman Lamont: The Secretary of State has talked about British Leyland becoming independent of the taxpayer. The target rate of return in the Edwardes plan is 10 per cent. For the period 1968 to 1973–74, according to the statistics—not my statistics but the statistics in the Ryder plan—that was the rate of return which British Leyland earned just before it had to go to the Government and be rescued. Is the Secretary of State confident that the rate of return in the Edwardes plan is sufficient to return the company to viability and independence of the taxpayer?

Mr. Varley: In the early years of the plan the rate of return will not be satisfactory by normal standards. We have made no secret of that, and I do not think that British Leyland or the NEB has made any secret of it. One can never be absolutely certain about the future either, but the figure contained in the proposals—that the real rate of return at the termination of the plan in the 1980s will be about 10 per cent.—is, I think, broadly correct. But it depends on all kinds of factors which, I am sure, the hon. Gentleman fully understands.

Mr. Michael Grylls: Will the right hon. Gentleman give way?

Mr. Varley: No, I want to get on. I want to deal further with the point that has been raised. That is the reason why I put the financial duty on the National Enterprise Board in respect of the Board's investment in British Leyland. As I have said, this is the form of the target rate of return on capital employed in British Leyland at 10 per cent. by 1981. In the years prior to 1981, the Board is to maintain progress towards that objective.
I am very conscious that this target is modest in comparison with previous expectations, but it is consistent with the whole approach—the approach which, I think, the board of British Leyland has been taking—and it has to be utterly realistic, setting realistic and achievable objectives for the company.
The Government have come to the conclusion that the Ryder plan concept of linking funding decisions not only to overall performance but to specific progress in industrial relations and productivity has been unhelpful—

Mr. J. W. Rooker: My right hon. Friend can say that again.

Mr. Varley: —and it has led to considerable uncertainty about the availability of future funds whenever there has been an industrial dispute. In fact, world-wide dealer and consumer confidence alike have been damaged, and the NEB and the Government have come to the conclusion that the annual funding decisions will be determined by overall assessment of performance against the plan's targets and the company's prospects.
Obviously, since the question of productivity and the state of industrial relations have a direct bearing on performance, these will be two important factors which will have to be taken into account in the determination of future funding. The Government therefore intend that in future years funding decisions should be made annually on the basis of a report each November, beginning this November.
There is one other thing I wish to say about British Leyland before turning to other aspects of the National Enterprise Board's activities, and I know that the Opposition are keen on looking at other aspects of the NEB's activities. The view is held in some quarters that the solution to British Leyland's problems is to hive off the most profitable parts of the company to private enterprise. It makes it even harder to believe that the hon. Members concerned really want to see British Leyland's success when ideas of that kind are put forward.
It has been suggested that the old special products division of British Leyland, now Special Products Industries, should be separated from the company. SP Industries has in recent years expanded into a company with a turnover of £200 million a year, making a very useful contribution to British Leyland's profits. If hon. Members think that the hiving off of Special Products Industries would make it earlier for British Leyland to increase its private sector borrowing facilities, we have only to consult people in the City, who would tell us that it would make it much more difficult.
In my judgment, the only purpose that this talk of hiving off achieves is to demoralise the new management and also to demoralise the work force of British Leyland. It is seen by them simply as the first stage of a carving-up exercise for the company. The same argument applies even more strongly to the suggestion that British Leyland should, for example, hive off Rover production.
I want to make it absolutely clear that none of the British Leyland profitable activities—Special Products Industries, Rover/Jaguar Cars and Bus and Truck—is for sale. It is as well that I should make that clear right at the beginning of the debate.

Mr. Alan Clark: Surely those who are in favour of hiving them off simply have the interests of those concerned at heart. If they are hived off, they at least will be saved. If they are left any longer with this dinosaur, they will probably sink into the mud with it.

Mr. Varley: That view is not shared by the present realistic board of British Leyland or by the NEB, consisting of senior industrialists and senior trade union leaders.
As the House knows, the statutory purposes of the NEB, which were agreed by the House, are to promote industrial efficiency and international competitiveness, and to provide and safeguard productive employment. These are formidable tasks, and in pursuing them over the last two and a half years the NEB has gone a considerable way towards fulfilling the role for which it was established.
The NEB is required, under the guidelines, to see the prospect of an adequate return on its investment within a reasonable period. The duty is to ensure a return of 15 per cent. to 20 per cent. on capital in 1981 and to make steady progress towards this target in the meantime. I have now determined a financial duty in respect of British Leyland which is similar in form to its general duty. I intend to determine a duty for Rolls-Royce within the next few months, when discussions on the company's plans are concluded.
By the end of 1977, the NEB and its subsidiaries had a turnover of £3,500 million and had exports worth nearly £1,200 million during the year. Employment in the companies in which the NEB has a stake, as I have told the House, is over 330,000. Apart from its subsidiaries, the NEB has minority shareholdings in an increasing numbers of companies whose expansion is being financed through funds provided by the NEB.
During 1977 the NEB invested £200 million in 22 companies, and now has shareholdings in 39 companies. Members will have seen the NEB's preliminary results for 1977. The NEB will submit its annual report and accounts to Parliament early in May.
The House will, I hope, have noted with satisfaction the announcement made by the chairman of the NEB last week


that Rolls-Royce made a pre-tax profit of £20 million last year. That is very good news, particularly following the company's loss of £23 million in the previous year. It is particularly impressive at a time when the level of activity in the aerospace and aero engine industry world-wide has been depressed.
These encouraging results from Rolls-Royce give the lie to the Press reports earlier this year which suggested that the company had made substantial losses in 1977. As the results have shown, those reports are completely without foundation. Fortunately, these rumours—which could have had a damaging effect on consumer confidence but did not have this damaging effect—did not stop the company from successfully concluding a major deal with Pan American World Airlines, announced only the other day. It is no exaggeration to say that this contract is the most significant order which Rolls-Royce has obtained for its RB211 engines in recent years, and the immediate prospects for the company's civil business, of which the RB211 is the mainstay, look promising, as long as the company remains competitive.
At the end of 1977 we received the Rolls-Royce corporate plan. That was made available to the NEB and, together with the NEB's own recommendations, we are considering the whole future of Rolls-Royce and its future technical and commercial strategy. We expect to receive proposals quite soon for a major new development programme which is currently being considered by the NEB.

Mr. Grylls: Naturally, we are delighted with the Rolls-Royce success story in recent weeks, but what contribution has the NEB made to achieve this deal? Would not Rolls-Royce have done it perfectly well off its own bat? What role has the NEB had to play?

Mr. Varley: The NEB has been of assistance to Rolls-Royce. That, I think, has been publicly acknowledged. If not, I am sure that the chairman and board of Rolls-Royce would acknowledge it. The relationship which exists between Rolls-Royce and the NEB is extremely satisfactory and harmonious. Therefore, it would be a mistake for the hon. Gentleman to suggest that the NEB has not been involved.
In fact, the company has come a long way since it was brought into public ownership in the early 1970s. We have shown our faith in its potential by supporting it—it has gone through extremely difficult times—particularly through our commitment to the successful development of the RB211 engines. Recent events have justified this faith. We are confident that Rolls-Royce can continue as one of the world's leading suppliers of aero engines, and we shall do all we can to make this possible.
Another aspect of the NEB's activities is the increasing involvement that I hope it will have in regional activities. The NEB's regional boards in Newcastle and Liverpool were recently established to make available to the North and North-West regions the fullest possible assistance for industrial development. There is no limit, within the NEB's total budget, to the funds available for regional purposes. The regional boards have been in operation for only a relatively short time, but both boards contain members with wide experience of all aspects of industry, and I am confident that they will make a real contribution to their regions in support of industry.
The record of achievement of the NEB in a relatively short time since its inception has been remarkable. As I have already said, we are very fortunate in getting senior trade union leaders and industrialists as members of the Board. By the very nature of things, this has been a period of preparation. The NEB has only a small central organisation, but it has first-rate managers with a wide range of industrial experience. This team has been working carefully to lay solid foundations for the future.

Mr. Tim Renton: Of the 22 new companies in which the NEB invested last year, how many are at or close to achieving the rate of return on capital employed of 15 per cent. to 20 per cent. that the Secretary of State outlined as a target for the NEB in 1981?

Mr. Varley: I cannot give the hon. Gentleman exact figures, but I shall see what further information can be provided on that front. I have not the figures to hand, but the general objective is that which I have already stated to the House.
The NEB's main task at present is to work by agreement to create partnerships with both existing companies and any new companies in which it invests. There are no easy solutions to our industrial problems, but there are solutions. I believe that the NEB can create the framework within which its current companies have a better chance of flourishing. I believe that it is possible to identify a number of real opportunities for British manufacturers, given the necessary backing, to succeed in world markets.
I see the role of the NEB in the coming years as follows. First, it is to ensure the success of its original major subsidiaries. These NEB subsidiaries represent a significant stake in three vitally important British industries—motor vehicles, aero engines and machine tools. The first priority, therefore, is to help these companies to succeed and to ensure a strong British capability in these industrial sectors.
The three original major engineering subsidiaries—British Leyland, Rolls-Royce and Herbert—are large and extremely complex companies operating in difficult circumstances in fiercely competitive world markets. They did not come to the NEB in the best of health. In fact, they all failed under private ownership. The NEB's role is based not on detailed interference with the management of the companies but on regular consideration of this overall strategy, the direction to be taken and the risks to be faced over the coming years.
The second task of the NEB is to expand the national strategy in a number of growth industries. Over the last two years detailed studies, in part based on the sector working party reports of the National Economic Development Office and a number of manufacturing sectors, have been undertaken. Resources are being concentrated on investment opportunities in a number of key areas. These investments will create partnerships with succuessful firms and expanding industries which can offer a good return for Britain, secure growth and long-term employment.
One sector is computers and electronics, particularly micro-electronics. With the major stake that NEB already has in Ferranti—in itself a success story, both for its own management and for the NEB—as well as the stake that it has in ICL and Data Recording Instruments, the NEB

already payes a crucial role in this vital sector of the economy. Data Recording Instruments is, for example, the only United Kingdom-owned computer peripheral manufacturer of any significance. With the NEB's support, we are currently undertaking a major investment programme. The practical effect of not proceeding with the programme would have been to exclude the United Kingdom from the world peripheral markets.
Again, the creation of its new company—INSAC—has greatly strengthened the position of the United Kingdom computer software industry. Five of the most successful and profitable companies in the industry which will influence the development of manufacturing in the coming decade have now joined with the NEB in this venture. The same approach is adopted in laying the foundations for growth areas, as can be seen, for example, in the investment which has taken place in Sinclair Radionics. It is now producing and selling about 4,000 sets a month and is operating profitably. It has ambitious plans for future development.
In fact, I was heartened to read last week in The Daily Mail what was said by a finance director of a small manufacturer in the North-West in which the NEB had just invested. He said that he and others
had picked the National Enterprise Board because of their muscle in electronics and their support for family concerns".
The NEB's third priority is to stimulate growth of exports by encouraging overseas marketing ventures. There is no doubt in my mind that this can be done. Britain has been suffering because it has not been able to get the investment packages that are necessary for overseas marketing in order to compete successfully in world markets. The NEB has recognised this and intends to create, where appropriate, substantial marketing organisations. An example of this is the new company—United Medical Enterprises—created in collaboration and in partnership with three large City organisations to encourage the export of British medical equipment and supplies. The total capital is about £8 million. It has been in existence for only one month, but I am sure that hon. Members will welcome that involvement. There is no doubt in my judgment that there is substantial potential business in that area.
There is, however, one further theme underlying the NEB's current activity and its planning for the future. It aims to provide the capital needed by successful small manufacturers, particularly in the regions. In a rapidly changing world, we need a spread of companies. Above all, we need to back the creation of employment opportunities, particularly in the regions.

Mr. Nick Budgen: Will the Secretary of State explain why the Government cannot keep to a more modest objective for the NEB, such as the resuscitation of what are said to be temporarily ailing industries or firms, and sell off successful firms such as Ferranti and avoid going into other objectives for the NEB?

Mr. Varley: I do not know whether the hon. Gentleman was in the House earlier when this question was raised. I made it plain that none of the NEB's profitable companies, particularly those making up British Leyland, is for sale. I do not think that that would be the way to go about it. That is not recommended by the NEB, which consists of senior industrialists and senior trade unionists. It is not recommended by the board of British Leyland. That would serve only to demoralise existing management and create unnecessary fears.
The NEB is confident that it can achieve a target yield of 15 per cent. to 20 per cent. by 1981. In doing so, there is every hope that it can make an important contribution to sustaining the economic future of the country, improving competitiveness and providing employment. The work which the NEB is doing on British Leyland, Rolls-Royce, Herbert and the other 30 companies which look to it for financial and professional resources needs to be done in order to improve its overall performance.
All these activities have a continuing role within the framework of the NEB. To carry them out—that is, not only to proceed with the work but to finish that work, and particularly to carry through the work which Parliament has charged the NEB with fulfilling—we must allow that body to have the financial resources that are needed. Inevitably British Leyland presents the heaviest demand on the NEB's purse. It is clearly right that we

should consider the NEB's statutory financial limit at this particular time.
But the House should be clear what the consequences would be for British Leyland and other NEB companies if the affirmative order to increase the NEB's financial limit were not approved. If British Leyland is to continue in business with a prospect of viability in the 1980s—

Sir Keith Joseph: The right hon. Gentleman is talking too fast. I cannot follow him. Will he speak less quickly?

Mr. Varley: I am sorry, but I have a lot to say.

Sir K. Joseph: On a point of order, Mr. Deputy Speaker. The Secretary of State read the last passage too fast. Could not the right hon. Gentleman go back a page or two and read it again?

Mr. Varley: I have a great deal to say, and I do not want to take up too much of the time of the House. In the remaining section of my speech, I shall speak slowly and deliberately for the benefit of the right hon. Member for Leeds, North-East (Sir K. Joseph).
The House should be clear what would follow if the House did not agree to increase the financial limits of the National Enterprise Board. Of course the sums for which we are asking in respect of British Leyland are very large, and the proposals come to us only after a very thorough consideration of the company's prospects first by the new board of British Leyland, headed by Mr. Michael Edwardes, and then by the National Enterprise Board. The Government have decided that it is right to endorse those conclusions of the British Leyland board and the NEB.

Mr. Loyden: I am glad that my right hon. Friend has now returned to what he was saying in his opening remarks about the consequences to British Leyland's position if Government resources were not made available. However, is my right hon. Friend aware that the plan which he is now recommending includes the closure of a factory in my constituency which has been supported by the NEB which has been given the task of creating employment opportunities in the area? Is my


right hon. Friend aware, further, that it is my firm opinion that the Government's decision to back the Edwardes plan has triggered off a number of decisions by major companies to close factories or to declare redundancies resulting in the loss of 15,000 jobs—[Interruption.] This is not a laughing matter.

Mr. Deputy Speaker (Mr. Oscar Murton): Order. I hope that the hon. Member for Liverpool, Garston (Mr. Loyden) has completed his intervention.

Mr. Loyden: I am asking my right hon. Friend whether he is aware that the Government's decision has been responsible for triggering off these decisions in private enterprise and that even at this late stage further thought should be given to the closing of the No. 2 plant at Speke.

Mr. Varley: I know that my hon. Friend feels very strongly about this matter. He has discussed it with me on more than one occasion, and not only have I made my views known to my hon. Friend and to the House but they have been made known by my right hon. Friend the Prime Minister on behalf of the whole Government.
British Leyland has the backing of the NEB and of the Government in the way that it is proceeding to operate. I very much regret the difficulties in the constituency of my hon. Friend the Member for Liverpool, Garston (Mr. Loyden), and we shall do all we can to overcome them. However, I cannot hold out any hope that there will be a reversal of the decision about Speke. So that I do not mislead my hon. Friend or the House, I must make that plain today.
We are asking for very large sums in respect of British Leyland. We make no secret about that. The Government have decided that it is right to endorse the plan which has been put to us. If we cannot provide the assurance for the National Enterprise Board and for British Leyland, the prospects for British Leyland are at risk and the consequences will be very serious. We need to do all we can to restore confidence in British Leyland, and we cannot do that by means of drip feeding. I have made it plain already that what we practised two years ago was incorrect. I do not think that it helped one little bit.
A vote against this much-needed investment would be a vote against our one nationally owned major vehicle assembler and it would be interpreted in some quarters as a vote of no confidence in this country's largest export earner—[Interruption.] Certainly it has been our largest export earner in the last few years. It would be a vote which could deprive several hundred thousands of workers of their jobs. It is essential to restore confidence in British Leyland, and I think that a good start has been made.

Mr. Hal Miller: Will the right hon. Gentleman give way on a point about finance?

Mr. Varley: No. I have given way many times already. I shall not give way to the hon. Member.

Mr. Miller: Mr. Miller rose—

Hon. Members: Give way.

Mr. Deputy Speaker: If the Secretary of State does not wish to give way, he cannot be pressed to do so.

Mr. Varley: I reckon that I have given way a great many times already, and I have given a great deal of information.

Mr. Miller: We want some facts.

Mr. Varley: There has been quite a success over the last few months. The market share of British Leyland last month reached 31 per cent., whereas in January it was only 21 per cent. That is a considerable achievement. No one would claim that we are yet out of the wood, but the management and the workers in Leyland are taking a realistic view about matters.
I ask the House to support and to have confidence in British Leyland and in the approach which has been made by the new management. I have no doubt that a vote in this House in support of these proposals will help to restore consumer confidence in British Leyland both at home and abroad. It is my view that the trade unions in British Leyland are now making a realistic assessment of the position. That was demonstrated at a conference only a few months ago. I think there is widespread agreement that British Leyland has an excellent and effective mamangement and we need to back it.
I have no hesitation in asking the House to approve both these orders.

5.6 p.m.

Sir Keith Joseph: There is an element of subterfuge about the bringing of these two orders before the House, and the Secretary of State has made a disingenuous speech. He has tried without actually telling any untruth—although I shall have to go through his speech carefully later—to say that without the additional money for the National Enterprise Board some part of the additional money proposed for British Leyland will not be available. That is plainly untrue. In fact, can the Secretary of State deny that out of its existing resources the NEB has already lent to British Leyland £275 million of the £300 million which the plan approved by the Government proposes should be made available to British Leyland by the NEB by way of equity?
The intention of the NEB is to convert that £275 million loan into a £275 million equity and to add a further £25 million equity to bring up the total contribution at this stage to British Leyland to £300 million. No extra order to raise the funds of the NEB from £700 million to £1,000 million is needed to achieve that. The money, all but £25 million, has already been transferred to British Leyland.
So the Secretary of State is charged with disingenuousness in failing to make that clear, and it reveals the furtiveness of this whole approach. Under the guise of helping British Leyland, we are asked to pass an immense additional burden on to the taxpayer for the NEB at a time when the NEB has produced only a preliminary statement of its 1977 results. The final results for 1977 are due in about four of five weeks.
When the Government seek such vast additional sums from the taxpayer, it at least behoves them to lay before the taxpayer and his representatives in this House some decent record of achievement, some decent programme of intentions such as Government supporters would rightly expect any bank or stockbroker in the City to lay before the investing public when seeking money.

Mr. Geoffrey Robinson: I am sure that the right

hon. Gentleman does not wish us to think him disingenuous. Will he therefore be very clear about one matter? If the whole of the money for British Leyland was being advanced under Section 8 of the Industry Act, would the Tories vote for it?

Sir K. Joseph: We have enough difficult questions to deal with without attempting to answer hypothetical ones. I shall try to deal with each of the questions in turn. But the first crucial matter to make clear is that the Secretary of State has fallen below even his standards in his presentation—[HON. MEMBERS: "Oh."] Yes, even his standards, because I thought in several cases during the steel controversy that he was less than frank with the House. So I repeat that he has fallen below even his standards in presenting the case for these two quite separate and distinct orders which are linked only for the purposes of easing the passage of additional money to the NEB from the taxpayer under the camouflage of an urgent need for Leyland which to a large extent has been met already.
I shall turn to the subject of Leyland and at a later stage turn to the NEB. We all want British Leyland to succeed.

Mr. Rooker: All of you?

Sir K. Joseph: We want the company to succeed. That does not mean that it is right in the interests of the taxpayer, whom we also represent, to go beyond a certain point with finance for British Leyland if British Leyland fails to play its part, as it has already failed, in providing its own contribution towards the funds needed for investment and working capital.
We were sceptical about the Ryder plan. We were much criticised for being sceptical, but the Ryder plan has been torn up and our scepticism has been shown to be correct.
In recent years I have not hidden my attitude to subsidies for industry. I am a learner, and I have learned a bit from recent years. I hope that hon. Members on both sides of the House have learned. There is plently to learn from the Leyland story and the NEB story. I believe that subsidies to industry do more harm than


good except in the rarest cases and that they should be provided for as short a time as possible.
The Secretary of State spoke about large sums, but never once did he say from where these sums are to come. It was as if the Government have a private mine. Well, they do—it is the taxpayer. However, if the money comes from the taxpayer's pocket, the taxpayer has less to spend elsewhere. For every job that is visibly saved there is probably more than half a job, if not a whole job, invisibly lost, or unidentifiably lost, somewhere else. No one can contradict that. Not even the Secretary of State will claim to have money to give to one place without taking it from somewhere else, either by borrowing, printing or taxing.
We regard it as disingenuous to speak of the money as if it could benefit British Leyland, and, heaven help us, the NEB without disadvantaging others. It is always possible that it is sensible to transfer money from taxpayers for certain purposes. We do not deny that. However, we do not believe that the right hon. Gentleman has made out a case in terms of the NEB.
We are asked to approve large sums of money. One of the main differences from the Ryder plan is that on this occasion large sums are to be made available without the regular monitoring that was part of the Ryder plan. One or two Labour Members expressed great satisfaction at the end of the regular monitoring. I am sure that monitoring was highly inconvenient and had many disadvantages. However, there are disadvantages when monitoring is dropped. The disadvantages lie with the taxpayer.
The taxpayer is now being asked to find £450 million this year and £400 million next year. I accept that we are not concerned with the latter sum at present. The taxpayer is being asked to find large sums without being able to check during the spending of the money and before the next slice is released the degree to which the NEB or British Leyland, as the case may be, is living up to its intentions.

Mr. Rooker: Es once a year not enough?

Sir K. Joseph: It was not considered enough in the Ryder plan, which the Government approved. The right hon.

Gentleman has openly confessed that the Government took a wrong decision about monitoring. They backed monitoring for the progress of industrial relations and productivity. They did so for a certain while and now they have dropped it. They are entitled to do so, but it follows from their change of policy that the taxpayer is asked to bear an even larger risk than otherwise.
We recognise that British Leyland is like a great ship aground. The Government have set themselves, with the taxpayers' money, to enable it to float again. British Leyland may in the event be providing us with an experience that will discourage future Governments from embarking on such rescues. We shall soon see, because it is made clear in the NEB report on British Leyland's plan that it believes
The main problem facing the company"—
—that is, British Leyland—is really British Leyland Cars. The NEB
believes that British Leyland is right to give the highest priority to a programme of short term actions designed to produce success in 1978 and 1979.
Therefore, we shall soon see whether the plans of the Government and NEB will be proved successful.
We want British Leyland to succeed. Who, with any sense, could conceivably want it not to succeed? It would be inconceivable for anyone to want it not to succeed. As I have said, we want it to succeed, but that leaves in our minds a number of doubts. We have towards British Leyland great good will and considerable anxieties. Our anxieties are not ours alone. They are anxieties that are shared by many voting for all parties in all parts of the country. They are anxieties that are shared by many industries and many regions. There is anxiety that vast sums are to go to one firm in one industry in a limited number of regions. Therefore, we do not have to apologise for having anxieties coupled with our good will.
Our anxieties can be dispelled only by British Leyland. However, much we may admire Mr. Michael Edwardes—I shall come to him with admiration shortly—a few good speeches—he has made some first-class speeches—and a few months of good performance—and there have been some months of good performance—are not sufficient in themselves to


end all our anxieties. We all share the same purpose—that the company should be profitably competitive. That implies that success must be achieved in design, quality and productivity.
What are our anxieties? I shall rehearse them relatively briefly. There are some who seem to be making war on parts of the company. One of our anxieties is whether this massive funding will weaken or strengthen the hand of that small minority.

Mr. Tom Litterick: Who are these people?

Sir K. Joseph: It is relevant to say that the modest and perhaps realistic targets for improved productivity in the Leyland plan are not nearly ambitious enough. The assertion of modesty in connection with a rise from five cars per employee per year to eight cars per employee per year by 1980 has to be seen against the unpalatable fact that productivity is not static at either end of the bracket. As we improve our productivity, those devils, our rivals, in other countries will probably improve their productivity, too. The danger is that we shall not close the gap unless management starts off and trade unions start off with ambitious plans to improve productivity.
It is relevant to observe that new and formidable makers of volume cars will be coming, on to the international scene. It is relevant to warn of increasing overseas competition. It is relevant to consider the dismaying record of British Leyland. At page 13 of the NEB report it is stated:
Despite the disappointing performance in the recent past, it is premature to conclude that the company has no future.
That is the NEB's view. I do not adopt that point of view. That is the attitude that the NEB is adopting. It is not a wildly enthusiastic assessment. That is relevant to our anxieties. It is relevant even to doubt the lasting effect of "Super-deal", which has accompanied the rise in share of market to which the right hon. Gentleman referred at the end of his remarks. We hope that it does not merely mean that some sales have been brought forward because of the large discount that has been offered during recent weeks.
In terms of our anxieties it is relevant to consider the cost of the rescue. There are the jobs that are threatened elsewhere. There is the burden on the taxpayer and the effect on tomorrow's Budget.
But our anxieties focus upon one feature above all, because there is one feature of the British Leyland-NEB plan which summarises the net effect of all the individual proposals. That anxiety is connected with the retained earnings which British Leyland has pledged itself to find as its contribution towards extra finance.
The House will perhaps need reminding that of the £2 billion covered by what is now the Edwardes plan, no less than £850 million is to be found by British Leyland from retained earnings between January 1978 and the end of December 1981. That is over £200 million per annum.
There are two questions. First, can this be done? I believe that it certainly can be done. The second question is will it be done. The records from the past of similar pledges to contribute from retained earnings have not been fulfilled. That does not mean that under the new management the new pledges will not be fulfilled. We fervently hope that they will be fulfilled. If they are to be fulfilled, designs have to be right, quality has to be right and productivity has to be right. If these are not right and the retained earnings do not make the contribution proposed, either the taxpayer will have to stump up more money or somewhere along the route there will have to be changes. These add up to big anxieties.
There was one question to which the Secretary of State could have given an answer, had he chosen, which would have eased our anxieties to some extent. I hope that the Minister of State in winding up the debate will give us a clear answer. The NEB and British Leyland have both talked of their intention to secure manning agreements for new machinery before the machinery is ordered. Could we have an answer from the Minister of State whether that intention has been and is being fulfilled? Have manning agreements to produce the productivity necessary to yield the retained earnings on the assumptions for


sales started to be made at satisfactory levels?
Against these anxieties I come to the plus points, because obviously we would not be here today if there were not some assets. The evidence that we have in favour of the British Leyland plan to dispel those anxieties is that there have been several months of better performance. That is enormously to be welcomed. We only hope that it is not a flash in the pan. We welcome it. We hope that it is the prelude to sustain better and better performance.
The even bigger asset now in our minds is the change of management, not because the previous managers were in any way to be blamed but because the NEB had invited to take the chairmanship a part-time non-executive chairman, and the change to a full-time chairman and chief executive is one which in principle is to be welcomed, particularly as the man filling the job, Michael Edwardes, for whom we have respect, is a man with a proven record. He seems to us to have made an excellent start. We hope and believe that the large majority of people who work in British Leyland are 100 per cent. with him and share his purposes and hopes. We want to believe that this man can manage this Herculean task. As he himself said, it is a gamble, an act of faith.
We regret that there is only one opportunity in the running of this financial plan to monitor the performance. Monitoring seems to us very important, however inconvenient it may be, as a check on taxpayers' funds. It was precisely to reduce the call upon the taxpayers' risk funds that I, for one, thought that it might be sensible to reduce the call upon the taxpayer by shifting some of the needs of investment money on to the shoulders of the private sector. The Secretary of State was very fierce about the possibility of letting any of the profitable parts of British Leyland finance themselves. He does not have to read sinister motives into such a proposal. He is taking a very inconsiderate attitude to the taxpayer. We would have hoped that he would try to reduce the call on the taxpayer as much as possible.
The House will perhaps be interested to know that nearly a third of the total finance for the four years is for investment

and increases in working capital for those parts of the business which are not cars at all. I am talking not about Rovers but about buses and trucks and special products which are not cars in that sense I am not going so far as to say that it would necessarily have been sensible to let that third of the finance come not from the taxpayer or from retained earnings but from the private sector through various alternative arrangements which could have been made. But I think that it would have been right for the Government and the NEB to consider this proposal to reduce the risk on the taxpayer I hope that the Secretary of State will not omit consideration of that if it becomes suitable.

Mr. Rooker: How can the right hon. Gentleman, on the one hand, say that he and the House have great confidence in Michael Edwardes and, on the other hand, say or imply that he wishes to be looking over the man's shoulder every working day of the year to make sure that he is up to the job? Why is not once a year sufficient? It was sufficient and successful for shareholders when Mr. Edwardes was in private industry with Chloride. Why cannot that be accepted now?

Sir K. Joseph: I think that Mr. Michael Edwardes would well understand our anxiety. He has to face putting right a tangled inheritance from years past. [Interruption.] I do not normally ask for your protection, Mr. Deputy Speaker, but the hon. Gentleman is suggesting that I am offering my advice to Michael Edwardes. That I should not presume to do. It may be that what we have witnessed in recent weeks—the improvement in performance—may—I am not making a charge—have had something to do with putting on a good show so that the next stage of finance will be available. I do not assert that. It is a possibility within human nature. If we remove that sanction, we make Michael Edwardes' job harder. It may be that Michael Edwardes has on balance asked that things should be this way. I expect that he has so asked. But I still regret, in the interests of the taxpayer, first, that the money is so big—I have pointed to a way by which it might have been reduced—and, secondly, that, being so big, it is scarcely to be monitored.
We want to give Michael Edwardes and those throughout British Leyland who share his purposes every chance of success, so I shall advise my hon. Friends not to stand in the way of the Section 8 order for direct money for British Leyland. I ought to add that I think that both the NEB and British Leyland emphasise that the calibre of management to support Michael Edwardes will need to be improved, and we understand and welcome the upgrading that must be occurring.
Now I turn to the National Enterprise Board order. I repeat—and I do not believe that anybody in this House or the Secretary of State can in any way contradict it—that it is utterly unconnected with the need for extra money for British Leyland. The National Enterprise Board, I repeat, has already provided £275 million of the £300 million proposed by way of loan. It will be converted into equity, and the NEB will add £25 million additional equity to bring it up to the £300 million. When it has done all that, as I understand it, it will still have over £60 million headroom below the £700 million ceiling which already exists.
If the National Enterprise Board wants more money to carry out commitments made to or by its subsidiaries, it will have that £60 million headroom. It also has the possibility of selling some of its subsidiaries. I believe that I have seen in the newspapers a proposal that Ferranti should be returned to the market. I think that has already been announced. There are other possibilities no doubt.
The NEB, in our minds, remains as a final financial standby in rare cases. We did not like the Bennery period of NEB. We did not like the Bennery proposals for the NEB that emanated from the Tribune group. We are not particularly keen on the Nebbery proposals. They are a far cry from Bennery—although nearly a synonym—but they come from the same stable. That stable is the State punting with the taxpayers' money. On this side of the House we do not like the State punting with the taxpayers' money. We do not want to put the National Enterprise Board in funds to offer, perhaps more or perhaps less discriminatingly, support to the private sector. Perhaps it is more discriminating than done by the market, but it might be less discriminating.

There are plenty of agencies offering investors' funds to business. There is no evidence that in this capacity there is any need for the NEB.
We do not criticise business men who go to the NEB for funds. If they suspect that the NEB is a softer touch it is sensible for them to go to it. In my remarks about the NEB I hope that I am not damaging my friendship with its chairman, for whom I have both liking and respect. One can have a liking and respect for a man and disagree with some of his opinions.
If the NEB needs more money than it has, let it put itself in funds. If it needs more, let the Government make out a proper case. It is not a proper case for the Secretary of State to make a few airy pronouncements about his judgment. It is his judgment, but it is not his money. It is his judgment on the taxpayers' money. It is not enough for the Secretary of State to make a few airy pronouncements on the basis of a preliminary report of the NEB and then ask for £300 million extra—a sum which has probably never been provided by the stock market to one company at one go.

Mr. John Garrett: Has the right hon. Gentleman considered the specific case of Sinclair Radionics, a company which has considerable technical potential and which is of great value to the country? That company would have gone to the wall without assistance from the National Enterprise Board.

Sir K. Joseph: I do not sit in instant judgment, but I observe that there are many businesses which are seeking profitable businesses in which to invest. The NEB is now one of them. I do not wish to comment on Sinclair Radionics, but a stronger case needs to be made out before £300 million of taxpayers' money is provided.
It is shameful that the Secretary of State and the Government should use British Leyland and its needs as a camouflage for this different and separate order for the NEB. I ask the House to realise that if the NEB order is passed and the funds are raised from £700 million to £1 billion we shall lose in the House all power to control a second huge instalment from the NEB to British Leyland at the end of this year. That is


because if NEB chooses it can hold in reserve enough money for a large part of the second proposed instalment for British Leyland without coming back to the House. That means that the limited power of monitoring which we hoped to retain will be lost if the NEB order is passed.
Finally, I come to a point about the NEB, on which the Secretary of State laid great emphasis. What a ridiculous, almost farcical position it is that the Labour Government and the trade union leaders together impose upon business, enterprise and the entrepreneurs of the country curb upon curb, discouragement upon discouragement, obstacle upon obstacle, high taxation and an avalanche of controls, regulations, Luddism and lack of understanding of how enterprise works. They impose all this upon them and when, by this blanket discouragement, they reduce the inherent, marvellously dynamic capacity of private enterprise, within a framework of humane laws, to create jobs and prosperity and higher living standards, they then come and ask for the NEB to make it all good by intervention on the side. What an absurd paradox it is that instead of the Labour Government and trade union leaders recognising that the rising unemployment and the static standard of living come precisely from discouragement by them of the process of job and wealth creation that the private sector, left to itself within a proper framework of laws, could carry out, instead of beginning to remove those discouragements they create the National Enterprise Board "investing from the hip" to make good the lack of enterprise. "Investing from the hip" was a phrase that came from an excellent speech by Mr. Ronald Grierson, a former chief executive of the IRC, which was a creation of the previous Labour Government.
We have to make two decisions this evening. On Section 8 I suggest to my hon. Friends that on balance we allow our hopes for British Leyland and our faith in Michael Edwardes and all who agree with him within British Leyland to outweigh our anxieties for the taxpayer. We want British Leyland to succeed and we back the Michael Edwardes-British Leyland effort. We should not, therefore, stand in the way of the proposed order.
However, on the NEB, which has already provided the bulk of the money for British Leyland and can provide the residue, I hope that my hon. Friends will vote against extending the funds, not for British Leyland, but for generally buying into British business.

5.38 p.m.

Mr. Geoffrey Robinson: I am grateful for the opportunity of taking part in the debate. I shall be brief because I know that many other hon. Members wish to take part. I shall direct my remarks to the question of British Leyland. I hope to be a little more decisive, direct and forthright than the right hon. Member for Leeds, North-East (Sir K. Joseph). May I inoffensively put to the right hon. Member that watching him perform from this side of the House one gets the impression that he is being tortured on the rack rather than speaking with the authority that the Dispatch Box should confer upon him? This pattern of tortured indecision bodes ill for the Opposition if, in the unlikely event of their coming to power, they persevere with the right hon. Gentleman's policies.
Since we last debated British Leyland a great deal has happened. Nearly everything that has happened has been for the good, ever since the chairman of the NEB, seeing that a strategy was in ruins and that a major national British asset faced destruction if a plan was persevered with, had the courage to make decisive and fundamental changes in the direction, the organisational structure and management of that company.
That could not have been easy. Those of us who have been in that situation at such difficult times known what is involved. That tribute should be put on the record.
The benefits have come quickly. They have come more quickly than I should have believed possible. Since then we have seen the redundant old top board scrapped. We have seen the meddlesome tentacular head office disbanded. We have also seen the ineffective, inefficient unrequired post office that the international department then was disbanded. Most critically—and this must have been the most difficult point, also—we have seen the car activities divided on a coherent and, from a product point of


view, logical basis. We now have the volume cars and specialist cars decisively and critically split. We have also seen new line management, which was previously weak, being recruited. We are seeing what was also very necessary to the company—decision-making being pushed down the line to the factories and to the line managers, who must have it. All that Mr. Edwardes has achieved quickly, decisively and with commendable business acumen.
The benefits have come through very quickly. The market share has shot up. It has gone up to 31 per cent. That may well be unsustainable. I would not disagree with those who obviously would argue that going in a matter of a few months from the dangerous precipice of 20 per cent.—the share could not have been allowed to go any lower than that—to 31 per cent. is probably too sharp a rebound. Not only do we notice improvements in the market share—critical an indicator though that is—but those of us in the Midland factories in the Cowley area see a growing resurgence of confidence among working people in the new management and in the new organisational structure that has been imposed.
As the Secretary of State said, it is a whole question of confidence. Confidence in British Leyland has not been helped at all by the ineffective irresponsible and at times incomprehensible speech that we have heard this afternoon from the right hon. Member for Leeds, North-East. Confidence in British Leyland can be got back. The management must realise that its initiatory role is also the prime one, because it is management's role to get the confidence of the men back. That confidence will be got back only by integrity and competence on a sustained basis by management. It can be got, but it will not be easily won, and it will have to be deserved by performance.
Next, there is the role of Government in the question of confidence, and that is a crucial role. I believe that the single most significant part of the Secretary of State's speech was on the question of the funding and the conditionality of it. It is not the monitoring that is in question at all. Everyone agrees that we have to monitor. It is the day-to-day linking of

the availability of the funds to specific instances of management decision or particular decisions in particular factories that makes for no sense.
Indeed, I think that the most significant paragraph of the NEB's report, which deserves a good deal of reading on the Opposition Benches, is paragraph 11.12, on page 12, from which I should like to quote:
The new Board of British Leyland argues that it must have an assured level of funds in the form of equity if it is to manage the company efficiently and if it is to concentrate on the tasks essential to restore it to commerial and financial health. It believes that the funding of the business is a means to an end and that it is not an end in itself, as is implied by the arrangements under which future funding is conditional upon, and regarded as, a reward for good behaviour.
I could not have put it better myself.
Listening to the right hon. Member for Leeds, North-East, one would have thought that he was trying to run a prep school and not a major British industry, with prefects monitoring daily behaviour. It may be one way of running a Shadow Cabinet. Looking at the composition of the Shadow Cabinet, it may be that some right hon. Members of the Opposition, particularly the right hon. Member for Worcester (Mr. Walker), agree with me that it is appropriate to the present Shadow Cabinet. But that is no way to run a major industry such as British Leyland.
I am pleased to see that the NEB agrees with that. I am also pleased to see that the Government have finally discarded a policy that was psychologically unproductive and was, from a practical point of view, also incapable of implementation.
Therefore, after two and a half years of going down the right track we find ourselves a long way behind. There is no doubt that those two and a half years have cost us far more than the two and a half years that they have lasted. We must realise then that we are starting from a long way back. We are, indeed—and I think that this is probably the one point on which I agree with the right hon. Member for Leeds, North-East—shooting at a moving target. None of us must try to pretend that this will be easy to handle. We are in for a long and difficult haul. I say this with


particular reference to the hon. Member for Surrey, North-West (Mr. Grylls). I am pleased to welcome him back to the Chamber from his excursion to Alice in Wonderland in his Sunday Telegraph article of yesterday.
Pulling this company back, getting it to be remotely profitable and generating the sort of cash flow that is required, is not something that we shall be able to see done in three years. I believe that we have to adopt a different approach to this. I do not believe that we should make the funding any more conditional on a 10 per cent. rate of return on assets, which, of course, will be far bigger than the assets to which the hon. Member for Kingston upon Thames (Mr. Lamont) referred during an intervention in my right hon. Friend's speech. Much bigger returns will be required by British Leyland to earn 10 per cent. on assets that will be increased by perhaps up to £2,000 million which will be invested over the next four to five years.
The approach that the Government should adopt, and that we as a nation and the Opposition should support the Government in adopting, is the policy that the French Government have shown for the last 27 years—I have dug out the figures to make the point—towards Renault. Since 1950 Renault—which I think most people would agree is now one of the best managed and most successful motor companies in Europe—has made £44 million profit in total. I would have expected the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) to throw his hands up in the air in dismay at the prospect and to declaim "What an awful investment." But, in fact, that investment made by the French people in their nationalised motor industry has been an extraordinarily good one for them. In those 27 years employment in Renault has increased by 120 per cent. It now employs 70,000 people more than British Leyland employs. In that period exports have increased by 2,000 per cent. That may be a meaningless figure, given the low base, but Renault is now exporting nearly 1 million cars a year, which makes the point. Renault's turnover is £3·5 billion—more than the whole of the NEB.
Those are very substantial national benefits, benefits that have been achieved because a Government have had a sustained purpose. I believe that the

British Government, if they can find the will, the courage, the vision and the self-confidence to back this team and this management, and if we could count on an iota of support from the Opposition, could do for British Leyland what the French have done for Renault. We should set our sights no higher and no lower than that.

5.46 p.m.

Mr. Peter Walker: I think that all of us, on both sides of the House, can agree that the hon. Member for Coventry, North-West (Mr. Robinson) is perhaps almost the only Member of the House who speaks with considerable practical experience of the motor car industry both at home and abroad. Therefore, his observations upon both British Leyland and Renault will be listened to in the House with considerable interest. I very much agree with the hon. Member about the vital importance to this country of British Leyland succeeding.
I think that this debate has been one of the most interesting debates from a political viewpoint that the House has seen for some time. It has been interesting from both sides of the House.
I found the speech of the Secretary of State for Industry interesting because he spoke with some justified pride as to the new team that has taken over British Leyland, and as to what he called the practical nature of the board that is now in charge. This is a long way from the sort of basic original dreams of nationalisation and all that. What the Secretary of State was saying was "I have succeeded in getting a team that is highly commercial, that intends to run this business efficiently and well, and I am giving it full backing."
I found that very refreshing, because the Secretary of State in his job, like myself in the same job, has made his mistakes. He enthusiastically supported the Ryder Report. This shows the difficulty of a politician such as the right hon. Gentleman, or myself, or any other politician, in making judgments on these great commercial issues. We all think that we know. We look at a few figures and facts and compare them with someone else's, and say that this should be done and that should be done. That is why I found the comments of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) interesting in terms of his lust


for monitoring. My difficulty is to know who does the monitoring. Even my right hon. Friend, who has considerable commercial experience and ability, would agree, I think, that he is not a terribly good bloke to monitor the motor industry.

Sir K. Joseph: indicated assent.

Mr. Walker: I admire all those splendid civil servants who work for the Secretary of State. They are men of great ability and integrity. But I do not think that they possess the immense ability to monitor commercial concerns.
What we in this House must face is that if we have a mixed economy, the only way in which we shall succeed is in finding chaps like Michael Edwardes, who surround themselves with some talented, able men who understand the world of commerce, and, if we think they have a good team, backing them. We have backed some losers. Occasionally we shall back some winners. What is desperate in regard to the present position is that we should back British Leyland in the attempts that it is making.
As regards the argument that if one backs one firm, one does not have the ability and money to back another, if we do not back British Leyland and if it does not succeed, such will be the increase in public expenditure for unemployment benefit and social security benefits, such will be the loss to the balance of payments, that we shall not be providing an immediate benefit available for other firms which could, perhaps, make better use of the money.
Therefore, in this debate my right hon. Friend was rather reluctant—understandably, because of the views that he has held over the years, which I respect, if I do not agree with them all—to say that we support giving a fairly substantial sum of money under the first order to British Leyland. But in his last remarks he made clear that the Opposition have decided that in their view British Leyland will be backed. My right hon. Friend the Leader of the Opposition has said that publicly now on a couple of occasions. The Shadow Secretary of State for Employment, my right hon. Friend the Member for Lowestoft (Mr. Prior), who is, I believe, to wind up the debate, has made this clear in speeches in the Midlands.
If that is clear on both sides of the House, I hope that we shall as a united House go on backing this scheme to see that it succeeds. There is immense commercial advantage if we have that certainty. There is first the advantage of recruiting top management. It is difficult to get the best men in the world to help with the company's management if there is some political uncertainty about its prospects in the immediate future.
That is important for overseas confidence. British Leyland exports £2½ million-worth of goods a day already—and that is after an immense loss of confidence abroad which will take some time to restore. There will not be much confidence abroad if there is any suggestion that a change of Government will mean a change of investment plans.
I very much favour the equity system. I think that my right hon. Friend the Member for Leeds, North-East would agree that a unique advantage of British Leyland in its present form, apart from the calibre of the new management—it now has one of the highest calibre boards in the country—is the insistence on keeping a private equity in that company. It may be minute, but it gives the board the right to tell the Government, "We will not do that under your direction, even though, politically, you think that it is right. We have all the safeguards of outside shareholders and the Companies Acts to protect their interests".
I hope that the Government, having kept a quotation for this company, having kept a private sector element—albeit small will, when industrial relations improve, as they must in the tolerably near future, ensure that further equity is given to those employed in British Leyland.
It would not be a bad thing, as the article in the Sunday Telegraph said, to have some direct stake for the whole team who will embark on the revival of this national company. It would give them some feeling that if they co-operate and collaborate in all the difficult decisions, they, too, will obtain some capital reward as the years go by.
I rejoice that in this debate the Labour Party has left aside its political attitudes towards nationalised industries. It has recognised that it has the best commercial board that it could find. I hope that


Ministers will give it the equity and let it get on with the job. If it fails, we shall all enjoy attending the public hanging of Michael Edwardes by denunciation, his removal from the board and his place being taken by another.
But if I still held the Secretary of State's office, I would find it difficult to find a board of higher calibre than the present one. It is desperate for the next Conservative Government that British Leyland should succeed during its period of office. I am glad that my right hon. Friend has agreed to support the order. I hope that we shall make it clear publicly and internationally that Michael Edwardes and his team have the support of the whole country.

5.53 p.m.

Mr. Tom Litterick: This is a strange occasion for the House, since the Conservative Party is apparently bending all its energies to convincing the British people that it is actually backing a nationalised industry. We should remind ourselves that, in this, the Conservatives are not running to form. Nor does this attitude conform to the propaganda that they manufacture daily in the country through their faithful servitors in the Press. Hardly a day passes without publicly owned industries being attacked, usually in the reporting of speeches by Conservative Members, who have a dogmatic and lasting hostility to public enterprise. Mercifully, the British people are all too familiar with this approach. Therefore, they will be able to judge the speeches of Conservative Members today in sophisticated terms.
For example, in Birmingham they will know that the various speeches made in pretence of supporting British Leyland are election speeches, designed to convince people that a vote for the Tory Party is tantamount to a vote for their jobs, when we all know from hints dropped already that they might carve up British Leyland should they win another election. That is a danger to which the people in the West Midlands are alive.
It is also remarkable, when one thinks back, to reflect on the Tories in their other incarnation as shareholders and people who work for shareholders through merchant banks. They were unwilling to support British Leyland when it needed financial support. The House

and the country will remember vividly Stokes' cri de coeur, and how British Leyland was valued by the very people who are now suggested as arbiters of success. They valued British Leyland at less than the value of the empty Centre Point in the middle of London. No one in the private enterprise sector then would provide a halfpenny of support for the then dying private enterprise British Leyland. Through an elected Labour Government, the British people decided that British Leyland, in their interests, must not be allowed to die.
The House should bear in mind that British Leyland is the only truly British motor vehicle manufacturer. That is not a chauvinistic point. So long as that remains true, there is still a chance that the British people will retain some real democratic control of one of their major industries. Ultimately, British Leyland should be used as the means of creating a truly national British motor vehicle corporation, incorporating all the existing motor manufacturers in this country which are currently owned by foreign-based multinationals. However, that is a task to which I am sure my right hon. Friend will look forward happily when fulfilling a future Labour Party election programme.
It should also be remembered that British Leyland is the only net exporter of motor vehicles in the British economy. The other three major manufacturers—Ford, Vauxhall and Chrysler—despite the public involvement in Chrysler, are all net importers. In the case of Chrysler, that is a continuing scandal. I had hoped to put a Question to Ministers on that earlier today, but apparently I missed it.
Those three companies make no positive contribution to the British balance of payments. That has nothing to do with the quality of the British worker or the state of the British capital market. It is simply the result of calculated decisions by those in charge of the three corporations to run a balance of trade deficit in Britain. They are concerned not about British interests but about the interests of General Motors, of Chrysler and Chrysler-Mitsubishi, and of the Ford Motor Company.

Mr. Hal Miller: Would the hon. Gentleman look again at his figures about the balance of trade of the


multinational car companies in this country? Would he be fair to General Motors and take into account the Bedford truck? Would he look again at the figures of Chrysler exports to Iran, and would he re-examine the Ford figures? He could not then sustain his present argument.

Mr. Litterick: Yes I could, with total confidence, because I am not relying on the information that the hon. Member has. I have gone into the detail of those figures. Many a car on British roads masquerading as a Ford, for example, was not made anywhere in Britain. A number of cars masquerading under various exotic names do not come from where they seem to come from. Even British Leyland, of course, actually imports cars, but—I repeat with all the confidence in the world—it is the only one of the four major car manufacturers in Britain which is actually a net exporter.
The situation is getting worse, not better, because we do not exercise control through our trade policy or through the planning agreements which we on this side have advocated to control the activities of the motor manufacturers. Therefore, the order making additional funds available to British Leyland is to be commended.
I am glad, too, that the Secretary of State has at least assured the House that the Government will stop pointing the gun at British Leyland's labour force and will cease the ludicrous practice of threatening workers at Leyland that investment funds will be cut off if they do not behave themselves—to use the usual Daily Telegraph terms—that is, if they do not become quiet, submissive employees. That was always a lunatic policy and it was inevitable that it would cause more disruption than anything else in the company, and it did. I am glad to hear that that policy is being abandoned—at least by the Labour Government.
The right hon. Member for Leeds, North-East (Sir K. Joseph) was still clearly hankering after something of the sort, the idea being that workers will work effectively only if they are threatened. Last week the correspondent of The Times, who I understand has no great sympathy for the Labour Party, talked of much whip cracking on the assembly lines, in the context of the

Edwardes plan. I promise the correspondent of The Times and the Tory Party that, if there is any damn whip cracking, there will be disruption and the Tories will be the authors of it if they try it. Workers, who are, after all, human beings, do not make a positive response if they have whips cracked over their heads. British workers, in particular, do not respond positively to such an expression of contempt.
We are aware of the consistent and unrelenting hostility which has been expressed by the Conservative Party ever since British Leyland was rescued by the State, at a time when the Labour Party was in power. We understand that it is the intention of the Tories, if they get the chance, to break up British Leyland and throw the good parts of that organisation to the highest bidder and the rest to the wolves, which means throwing thousands who work at British Leyland and tens of thousands who are dependent on supplying British Leyland with parts out of work, as the Tories would have happily allowed to happen in 1973–74 if they had had the chance. They would have allowed the organisation to fall apart.
The right hon. Member for Leeds, North-East, who was a prominent member of the previous Tory Administration, is wholly committed to the concept that the market must be allowed to have its way. The market having its way in this case would have meant the devastation of an organisation and other organisations employing more than 600,000 people, with catastrophic consequences for a number of communities and for the Exchequer.
A number of speeches, particularly the speech of the right hon. Member for Leeds, North-East, have illustrated the Tory fixation with the idea that an organisation does not become more efficient unless someone is being made unemployed. This monomaniac notion should be dispelled from Ministers' minds. There is no necessary correspondence between making people unemployed and an organisation becoming more efficient.
One of the shortcomings of the so-called Edwardes plan is that its assumptions about the size of the market in which British Leyland will be able to operate are very modest. Therefore, the consequential effects of the changes in


technology that are involved in this so-called plan mean that people will be made unemployed.
On different market assumptions that would not be so. In short, the assumptions are far too modest. They assume the inevitability of a contraction in the labour force instead of asserting the possibility of expanding the market itself. The potential market is not confined to the existing markets, which are all too dependent on the highly developed durable consumer goods market of Western Europe. The markets are in the rest of the world, and British Leyland has ample experience of marketing in the rest of the world. I therefore suggest that possibly one of the fatal weaknesses of the so-called Edwardes plan is that it is far too modest in concept and will inevitably result in unemployment on a significant scale, which will damage the West Midlands economy even if the plan proceeds. To that extent I remain a critic of the Edwardes plan.
There has been much talk of the fact, as the right hon. Member for Leeds, North-East said, that British Leyland did not need the funds. There was certainly a very large shortfall in investment fund spending last year and that has resulted in a considerable disruption in other British industries, particularly the machine tool industry, but it has been widespread. The investment programme should be enlarged and accelerated. The market on which the plan is based should be revised and should be seen as a bigger potential market than that in which British Leyland is to work. If the investment programme is not put through in its entirety, the West Midlands economy will be severely damaged. Time is of the essence. Many of the things that need to be done take a considerable time to take effect, but if action is not taken speedily on this order the West Midlands economy will be severely damaged.

6.5 p.m.

Mr. Andrew MacKay: The hon. Member for Birmingham, Selly Oak (Mr. Litterick) was quite right in saying that British Leyland is one of our biggest exporters. I could not understand his argument, however, that we should introduce import controls. Would not that lead to a tariff war? I am convinced that British Leyland does not want import controls providing that

competition from abroad is fair and is not subsidised.
Another point that worried me about the hon. Member's speech was that he had what he thought was a great idea to the effect that there should be one British national motor company. I believe that that would be a disastrous mistake. There would be no competition. It would be bad for such a company in the long run, and it would be extremely damaging to British consumers. I am sure that in replying the Minister will not adopt that argument.
We start from a position from which many of us would not like to start. A large number of mistakes have been made in British Leyland's immediate past. The 1968 merger was entirely unproductive and has proved again that a big organisation is not always beautiful. Secondly, the Ryder plan was, rightly, criticised on this side of the House. We are naturally delighted that today the Secretary of State admitted that the plan was hastily conceived. We made many mistakes in swallowing that plan hook, line and sinker.
There are two logical choices for Leyland. The first is that no Government money is made available. The second is that we back British Leyland financially to the hilt. It is totally unacceptable in logic to give British Leyland a little money and then say "Let us see how we go from here" and then possibly make available a little more money. That would be the worse of both worlds. It would bankrupt the company in the end and would waste a sizeable sum of taxpayers' money. I do not believe that the House wants either.
It is important that the nation gives Michael Edwardes and the Leyland organisation the money they require. I only wish that the Secretary of State had been a little more straightforward when he asked us to approve the sum of £150 million, which the Tories will certainly approve, and then suggested that some or all of £300 million will be required to go to Leyland Cars. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has proved the contrary to be the case. The Minister did the cause of British Leyland no good, and I regret that.
I want to give some extra reasons why it is important for us to back British


Leyland in these difficult times. Hon. Members opposite sometimes say to me "You are two-faced because of your constituency interests. You are prepared to back British Leyland and to vote money for that cause because you come from Birmingham, which you represent and where you have a business interest, but you are not prepared to back other companies which have run into difficulties."
My answer to that charge is this. I I believe that there is a future for car manufacturing. Cars will be manufactured and sold for many decades to come. I want Britain to play a part in the manufacturing of cars. It is, on the other hand, fruitless to waste the taxpayers' money by giving—through the National Enterprise Board or by other means—great subsidies and thereby helping steel, shipbuilding and other dying industries if one is throwing good money after bad.
The second reason why I felt it important that we should help British Leyland was that the economic effects—here I agree with the hon. Member for Selly Oak—on the West Midlands and in the city of Birmingham would be considerable. This is not just for those who work at Leyland. It would also be very considerable for those who work in the component industry and the suppliers of labour.
I want to kill one myth, namely, that if Leyland went under the component manufacturers would find a ready market elsewhere. Only last week I was informed by a very senior director of a very important supplier and a household name in the Midlands that if Leyland went under only 10 per cent. of the production which goes to Leyland at present could be put elsewhere. That would have disastrous effects on this country as well as on Leyland. We have already heard that Leyland is a major exporter. Obviously the money that we receive from the sale of Leyland vehicles is of great benefit to our balance of payments.
There is an equally important side to this matter. Let us say that Leyland goes under and then some people say "The cars that are sold in this country—Ford, Vauxhall and Chrysler—will take up the slack." That is not the case. The majority of that slack would be taken up by Japanese

and Common Market competitors, thereby making our balance of payments considerably worse and increasing the share of the market of the foreign manufacturers.
It is important that we give this money, because Leyland Cars is desperately in need of new models. I make no apology for mentioning the models. I would say to the management of Leyland that if, as is now happening, the Government and the taxpayers are giving money to help Leyland, it has to be prepared for a certain amount of public debate about the products involved. I know that there are disadvantages. A company in private hands can develop its model range without criticism in this place and without comment—not always constructive criticism—in every pub and bar in the country.
But it is apparent to everybody that the Marina, Allegro and Maxi and the Dolomite range are long in the tooth. It is apparent to every observer that this is an area in which there will be growth. The medium-size saloon for family and company use is where the important market will be in future. That is why I was so very pleased to see in the Edwardes plan that the money for the time being is to be retained and the new model will be in that area.
We talk about £450 million and other vast sums of money which we as individuals cannot even contemplate. Let us try to put it into perspective. It costs approximately £125 million to £130 million to produce and develop a new engine. It costs approximately £80,000 to produce and develop a new body. That shows that, although the sum of £450 million is vast and fantastic, at least we know where some of the money is going.
The second area to which the money must go is in improving the production speed and the quality control in the specialist car area where Leyland has immediate winners with the Rover, Jaguar, Land Rover and Range Rover modes. However, unfortunately, delivery is poor and the standard of reliability has let the company down in both home and overseas markets. I was delighted to see this as a major plank in the Edwardes plan.
One area to which the money should not go—it is important that the Minister and


the NEB should ensure that it does not go to this area—is in developing the components side of the Leyland enterprise. We have perfectly good component manufacturers in this country who can supply, at the right price and with efficiency, Leyland cars. Let us not allow money to go to an area which is already well covered and which could well put people out of work in certain of the component manufacturing areas.
I suspect that certainly in my year in this House and probably for longer rarely has one man's name been mentioned so often in a debate except when he has been an international statesman, a politician or a criminal. Michael Edwards is not one of those three, but never has one person's name been mentioned so often in the course of a debate. I shall not dwell on it except to say that I find his plan to be excellent. I believe that he is very much on the right lines in reducing overmanning, which has to happen, no matter how unpalatable. Overmanning has to be considerably reduced in order to increase production.
Also—I speak advisedly, knowing that the hon. Member for Liverpool, Garston (Mr. Loyden) is present—it was right to close the Speke No. 2 plant. The industrial policy of not allowing expansion in the West Midlands and giving IDCs primarily to development areas has proved not to work in this case, because the standard of workmanship and of industrial relations has not been sufficiently high. It was a dreadful mistake for Leyland to go to Speke in the first place.
I believe that the morale in management is much improved in Leyland. I only wish that the same improvement and the same optimism had been shown on the shop floor. I see some improvement, but I was disturbed when I learned on Friday that by a two to one majority it had been decided not to accept the incentive productivity wage scheme. This is very regrettable. I hope that those people who voted against the scheme have some very good alternatives, because I believe that at this crucial time for Leyland they might be jeopardising their own jobs and the future of that company.
I conclude by stating one other fact. I do not accept the Secretary of State's argument that nothing in Leyland should be sold off. However, there is a big

difference between specialist cars which are, rightly, part of the Car Division and special products. I do not accept the argument of selling off Rover and Jaguar or any other part of the Car Division. We must be vehicle manufacturers completely, with bus and truck as well. I believe, however, that in the fullness of time the Leyland board and the NEB must consider selling off parts of the Special Products area. First, they are nothing to do with the manufacturing of vehicles.

Mr. Robin Corbett: As I have a Special Products plant of British Leyland in my constituency, I should like the hon. Member to be more specific and tell the House which bits of that division he would advocate selling and why and when.
Mr. MacKay: I am delighted to have that intervention from the hon. Member for Hemel Hempstead (Mr. Corbett). I shall expand on that matter. First, I believe that it will be up to the NEB and the Leyland board to decide which parts are profitable. Most parts are profitable. Most parts have no particular connection with Leyland. If they were separated and sold, that would affect neither the employment in the constituency nor the profitability of the plant concerned. The money obtained would go to finance the new models and to giving the other money which I have explained is required.
Whilst we in the House are prepared to grant money through the NEB to Leyland, it is important that Leyland also plays its part and sells off as and when it is convenient. By "convenient" I do not think we should just say "Special Products is going in the next few months and is up for offers." The sale has to be commercially organised. Parts of the company should be sold off as and when there is the right buyer at the right time. I do not believe that in the long term the manufacture of cars at Leyland would be affected. It would be a great advantage.

Mrs. Audrey Wise: Will the hon. Member give similar advice to other industrial conglomerates, namely, that they should sell off their more profitable sections, or is that the sort of advice that is reserved for publicly owned enterprises?

Mr. MacKay: If they need money. They do in the private sector. As a Member of Parliament, I shall not give advice to people who have not come to us for aid.
There are other very profitable sectors of Leyland, such as Jaguar, in the city that the hon. Lady represents, such as Triumph, Rover, MG, Leyland trucks and commercial vehicles. We are not suggesting that we should sell off only what is profitable and keep in the State what is unprofitable. We are suggesting that we should get back to vehicle manufacturing as the prime base of the Leyland enterprise and sell off such enterprises as the manufacture of freezers, trailers and a thousand and one incidental items.
My conclusion is that in due course, when Leyland is back on its feet financially, we must make sure that a certain amount of the equity is put back into the market and sold to the private investor, and—just as important, as my right hon. Friend the Member for Worcester (Mr. Walker) said—that it is offered to employees of Leyland so that they can feel that they have a greater part in the company. I can foresee at the very least a BP position, with the Government having a minority but substantial interest in Leyland.
I believe that with the degree of support that Leyland has had today from both sides of the House we can see a rosy picture. It will be a long hard struggle, but we must be realistic. I think that if we follow the line set out in this debate, Leyland has more than an even chance of succeeding, and—by God!—it must succeed.

6.21 p.m.

Mr. Eddie Loyden: I do not want to follow the line taken by the hon. Member for Birmingham, Stechford (Mr. MacKay), but I want to make at least one point about his contribution. The House will understand if I later confine myself to the problems that beset Merseyside as a result of the National Enterprise Board's decision.
My main opposition to the whole statement that has been made, and the decisions that have been taken and supported by the Government, concerns the closure of the No. 2 plant at Speke. It is significant that those who want to act in a divisive way have supported the idea that

that plant should be closed in the general interest of British Leyland. If the closure had been taking place in the hon. Gentleman's constituency, I wonder whether his views would have been consistent with those he has just expressed. I am certain that they would not.
I am concerned about the future of British Leyland as a whole, and in that sense I give qualified support to what the Government are saying about British Leyland's future. I am also concerned about the future of the National Enterprise Board and its activities. I want to give qualified support to the NEB and its future activities, but our experience is that the Board's activities have fallen far short of the Labour movement's expectations. On this issue, they have fallen far short of the expectations of the movement in the Merseyside area.
One of the Board's roles was to begin the process of refurbishing industries in areas of industrial decline and carrying out a job-creative programme in those areas The decision taken by Leyland, backed by the Government and with the involvement of the NEB, goes in a completely opposite direction.
It was reported today in The Daily Telegraph, I think with a great deal of justification, that Leyland's decision, with the involvement of the NEB and the Government, has resulted in the private sector in that area using that as a basis for decisions resulting in closures and redundancies that might well not have been made but for Leyland's decision. This suggests that the broader base of the economy will also be affected in this way. Labour hon. Members in particular should be concerned about the tendencies emerging from the decisions taken here and their effect on the Merseyside region. Since the Leyland decision, about 15,000 jobs have been threatened.
In the final analysis, it was not the production or performance of Leyland that was the major problem, as would be suggested by the Conservatives. It has been a question of producing cars that were unsaleable. That is true of the Speke No. 2 plant, tied exclusively to the production of the TR7.
There is no doubt in the mind of anyone who has followed the history of the TR7 that from day one it was a complete, abysmal and costly failure. It is


obvious that when it became apparent that the TR7 was a costly and miserable failure the blame had to be pointed away from those responsible for making the decision about the production of the car and for the sort of market research that went into it to see whether the car was saleable in the United States and Canada, whether it was designed for that market and so on.
Anybody who has studied the history of the TR7 can come to only one conclusion, that the car was a failure from day one. It was not saleable on that market. Therefore, it would be in the interests of those who made the decision to bury as quickly as possibly the embarrassments that they would face over their decisions. Therefore, the whole question of fault is turned towards the workers at Speke No. 2 plant in particular.
It is interesting that in the New Statesman this week there are certain disclosures that would argue very forcefully against those who wanted to say that the performance at Speke was the main and almost exclusive reason for its closure. It is apparent from the disclosures in that journal that that is not so.
Although the Leyland management has offered to provide the figures that would prove conclusively that it was the case—and to be fair to the management, some figures have been produced—there has been no conclusive evidence that the reasons behind the closure of Speke No. 2 had anything to do with the question of performance.
What we are seeing in Leyland is the tendency for British industry now to start cutting back on its capacity. Where the Government back that sort of argument, as they are doing now, it follows that private enterprise will take advantage, as it is doing in Merseyside, to cut back capacity, in the realisation that the upturn in the economy that everyone has been hoping and praying for has not occurred.
Make no mistake about it: the decisions taken in that area will be extended into other sections of private enterprise and elsewhere, as we are already seeing with steel and other parts of the publicly owned industrial sector.
Therefore, the question of what is going on is vital to those in the Labour

movement who believe, as I do, that the Government's whole economic strategy has been wrong for the past two or three years. Certainly the Government have not brought about the proper utilisation of the NEB. I did not envisage, and as far as I am aware no one else on the Labour Benches envisaged, that the NEB was brought into being for the purpose of recommending the cutting and slashing of 3,000 jobs in a publicly owned industry.
For us, it is not simply the future of Leyland that we are discussing, but the whole question of the Government's economic strategy. I give this warning to my Front Bench: if Ministers think that the fight for Leyland is over, they are sadly mistaken, because it will be for the Labour movement to take up the fight against unemployment generally in the area to which I belong and certainly in relation to Leyland. I shall support and join those forces that are resisting attempts to bring further unemployment to Merseyside with closures and redundancies. I shall identify myself clearly with those who are opposing that trend, since they are, in fact, defending the whole future of Merseyside in so doing.
If that decision is taken through, it will be no easy task. Let no one imagine that one can go ahead in a nice oily way to put through the decision for the closure of Speke. Yesterday on Merseyside there was a conference which made patently clear that there will be great resistance not only to the closure of Speke but to recent other happenings on Merseyside. For example, there is the recent decision to close the Spillers factory at Walton, in the constituency of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), threatening 8,000 more jobs. There will be spin-off effects from that for the Birkenhead docks, which now depend on the conveyance of Spillers' meal and grain, that factory being one of the main users of the dock facilities for those commodities.
Perhaps I have drifted somewhat from the subject of British Leyland, but it is imperative that we show that our concern is not just about British Leyland. What concerns us is the direction of the Government's economic strategy. For my area the present trend is tragic. My right hon. Friend the Secretary of State said that without the cash being available the


Midlands will be made a wasteland. Let him go to Merseyside now. It is already beginning to be a wasteland, partly because of decisions taken by the Government, by the National Enterprise Board and by British Leyland regarding the closure of Speke No. 2 plant.
As I said earlier, the House should realise even at this late stage that if we do not wish to see a really worrying political situation develop in that area, the Government should think again about the closure of Speke No. 2 plant. There is no doubt that private enterprise is using it as a basis for arguing for closures and redundancies which will turn to nothing the Government's policies for special development areas. In fact, that has been made clear from the Opposition Benches. I hope that it will be noted that the Opposition have said that the Labour Government were wrong in the first place in sending Leyland to Merseyside and that their policy on industrial development certificates was wrong.
If it is said that the Government have been wrong, it is up to my Front Bench to think again about what their policy is doing for employment on Merseyside and, for that matter, throughout the whole United Kingdom. I hope that the Government will take seriously what is said in this debate and will realise that there will be full resistance to policies which put out of work people whom I represent by the closing of factories in my constituency and in other parts of Merseyside.

6.32 p.m.

Mr. Richard Wainwright: Fortunately for British industry and for the reputation of the House, the adversary approach which the right hon. Member for Leeds, North-East (Sir K. Joseph) sought to adopt at the beginning of the debate has not so far been followed on his own Benches, and, in so far as there have been controversial speeches, they have come from below the Gangway on the Government side. That leads me, at least, to feel that both Mr. Michael Edwardes and the National Enterprise Board are broadly probably on the right path at present.
Before coming to two or three of the matters which have proved somewhat controversial, I shall refer to two matters

which seem to me to be constituted of sheer fact. First, it seems to me factual that the two matters before the House today—the motion for £150 million and the Statutory Instrument covering £300 million—stand or fall together, whether they be right or wrong. I cannot see any logic or common sense in attempting to divide the two, either from the point of view of British Leyland or from the point of view of the National Enterprise Board.
As regards British Leyland, it is clear from passages in the NEB's report on British Leyland's corporate plan that the £450 million is a carefully considered sum put forward very deliberately by the chairman and his new team at British Leyland. Obviously, it has been argued out in great detail, and in no sense is it a bidding figure put forward by the chairman with any thought that he would get something rather less.
It seems to me that this is a sum which involves the future service of Mr. Michael Edwardes and his team, and my reading of the NEB's report is that, putting it in the nicest possible way, without appearing to shove a gun at the head of the House, if the £450 million or any part of it is refused tonight, Mr. Michael Edwardes and some of his team will not remain much longer in their key positions. If I am wrong in reading that into the NEB's report, I shall be glad to be told soon.

Mr. Hal Miller: Is it the hon. Gentleman's reading of the papers that the NEB cannot make its funds available for British Leyland without having the additional funds put in? That is not my reading.

Mr. Wainwright: The hon. Gentleman might have waited a moment, because I said that I should first approach these matters from the point of view of British Leyland and its need for all the £450 million and I should then turn to the National Enterprise Board's position. I now come to that, having apparently excited no opposition to my point about British Leyland's absolute need for £450 million.
As regards the National Enterprise Board, I was astonished that the right hon. Member for Leeds, North-East, whom we all acknowledge to have considerable financial experience and acumen in what, to me at any rate, is big business, should suppose that a body such


as the NEB, charged by the House with heavy and continuous responsibilities, would be willing to face the immediate future with £575 million out of its present limit of £700 million absolutely committed. I cannot imagine anyone being willing, as it were, to run for much longer a merchant banking enterprise of the size of the NEB with only £125 million up its sleeve, especially since it has responsibilities to, I think, 36 client companies with which it is already heavily involved.

Mr. Grylls: Thirty-nine.

Mr. Wainwright: The hon. Gentleman says that there are 39, and that strengthens my argument. Furthermore, all of us in the House expect the NEB to behave as an ongoing enterprise. Is it suggested that it should hang notices in its premises at Grosvenor Gardens saying "Business temporarily suspended owing to over-commitment to British Leyland"?
I say categorically that, on my reading of these matters, a margin of £125 million for an entity such as the National Enterprise Board would be intolerably small, and I suspect that it is in fact less than the NEB's total of present responsibilities and projects. I am willing to give way if that can be confirmed, since it is important that the House should know.

The Minister of State, Department of Industry (Mr. Gerald Kaufman): In fact, although he is very much on the right lines, the hon. Gentleman is understating the position. When he refers to £125 million over and above present expenditure, plus the commitments to British Leyland, he is not taking into account that the wholly owned subsidiaries of the NEB have approved borrowing facilities with banks at present unused amounting to £61 million.
If those facilities are utilised, they will count against the borrowing limit, and in all prudence the Board has to provide for those in case they are utilised. That means that the total is taken up to £636 million immediately, which leaves a balance of only £64 million, which is entirely insufficient to meet the forecast needs of the NEB group of companies, excluding British Leyland, for fixed and working capital over the next 12 months.

Mr. Wainwright: I am obliged to the Minister, and I shall therefore move on

to the second matter of fact to which reference has been made.

Mr. Kenneth Clarke: Will the hon. Gentleman recognise that the commitments of the NEB and the companies with which it is involved include some which are eminently realisable? Among the companies owned by the NEB are some which have been successfully turned round and which could at a suitable moment be put back on the market. Is the Liberal Party as committed as is the Labour Party to the concept that the NEB will never denationalise any of the companies which it acquires? Is the Liberal Party totally opposed, for instance, to any prospect of Ferranti being put back into private hands?

Mr. Wainwright: The hon. Gentleman knows perfectly well that the condition of the Liberal Party's support of the NEB, from the moment when it first appeared in the Industry Bill in 1975, was that, as we said on many occasions, it must be regarded as an in-and-out organisation which is prepared to dispose of companies at the right time with as much care and relish as in acquiring companies. But the governing phrase must be "at the right time". I am very surprised that the representative of business speaking from the Conservative Front Bench should suggest that publicly owned assets—assets acquired on behalf of the taxpayer—should be in danger of being flogged off to meet a situation caused by this House grudging the NEB a proper margin within which to operate as a civilised concern.
The second matter of fact, which is of equal importance, concerns the suggestion of the right hon. Member for Leeds, North-East as to the peculiarly inept business in the Ryder plan of doling out Government money only as long as there was a good report on industrial relations. Most Opposition Members condemned that ineptitude at the time. The right hon. Gentleman for Leeds, North-East was implying repeatedly that monitoring on behalf of the public would now be only an annual performance. But in the NEB's report on the British Leyland corporate plan, which has been available at the Vote Office for some days, there are repeated references on page 12 to the NEB's intention—indeed, its pledge—to


monitor British Leyland, and especially its capital expenditure, continuously.
I shall content myself with two short quotations from paragraph 11.13 on page 12. The first is that:
the NEB will continue to monitor the company's performance against budget during the year".
A few lines later it is stated:
Major programmes of capital expenditure will continue to require the approval of the NEB.
I make it clear on behalf of the Liberal Party that we have always, from the outset of the British Leyland affair, maintained that monitoring by the NEB was much more likely to be satisfactory than was monitoring by politicians or even by over-pressed civil servants with many quite different concerns on their minds.
I turn now to possibly more controversial aspects. There has been a good deal of talk today, which I found very facile, about flogging off parts of British Leyland in order to try to reduce the sum on which we are being asked to vote tonight. I look forward very much to a time—I cannot say when it will come—when British Leyland, or parts of it, will be eagerly sought after by the market. I believe, without prejudging the issue, that there may come a time when the corporate health of British Leyland and its workers will be so robust that it can perfectly well do one or two very good deals with the market, with some parts of British Leyland, on behalf of the taxpayer. But that is years and years away.
To start flogging off at this moment one or two jewels in the Special Products crown would seem to me to be an appallingly stupid provocation in regard to industrial relations, just when people everywhere, including Opposition Members, are commending Mr. Michael Edwardes for slowly bringing a rather better spirit into the whole enterprise. Incidentally, as hon. Members know, Mr. Edwardes is also trying, quite rightly, to interest the whole country in the future of British Leyland and induce us all to become customers of it. To suggest, therefore, that the process of disintegration has begun would be a height of folly which would never enter Mr Edwardes' mind or that of the team around him.
There is also the further possibility that to do anything such as this would

be an absolute gift to those who stand at the gates of British Leyland factories selling Socialist Worker and also the publications of the International Socialists. I ask hon. Members to consider this. Any price which could be found on the market for any part of Special Products Industries could most easily at the present time be represented by the extreme Left wing in its newspapers as a free gift by the British Parliament to certain financial interests.
The dealings of this House with British Leyland and the rescue operation have never put any price tag on the separate parts of British Leyland. It was an overall deal in which the public acquired the shares of British Leyland. It would therefore be the easiest thing in the world for the scribes of extreme Left-wing newspapers to misrepresent any sale at the present time as an appalling piece of financial jobbery in the interest of a privileged few.
I and my Liberal colleagues regard the new British Leyland plan as a very welcome piece of realism. It is stressed that the question is sheer survival. That is a very welcome change from the grandiosity of the Ryder plan. It also suggests that short-term considerations must at all points have priority over longer-term dreams and visions. That must also be right at the present time. It is extremely realistic—even though it is perhaps disappointing—that Mr. Edwardes proposes and intends a big shift in capital spending away from the volume part of the business into vehicles and special products. We welcome particularly from the Liberal Bench the smaller management units and profit centres which Mr Edwardes is already installing.
I hope that this policy will be taken further and that the financial results each year of each of the profit centres will be published to hon. Members of this House, and through us to the whole country, so that the public, which pays for this business, will know year by year how each part of the business is proceeding.
We also welcome the much more discreet attitude of the present management team towards industrial relations. There can be no hope of solving these delicate problems on the shop floor if they become part—as they seemed at one time to be in danger of doing—of the yahoo politics


and matters of facile exchange in this House.
I have only one critical comment of the slightest importance to offer. That concerns the danger, which some of my colleagues sense, that Mr. Edwardes' admirable efforts to convey an image of British Leyland as a great British company, selling British products, if not managed with extreme skill and delicacy, may hamper what we regard as a very desirable European trend in the vehicle industry. I refer to the trend towards industrial partnership with our Common Market colleagues. I am advised, for instance, that in the very tricky matter of creating an all-aluminium engine for at least one volume car there might well be a great deal to be said for the early development of a close partnership with Renault, which has already taken the decision to have a huge aluminium foundry and to create an aluminium engine of the size which could be very useful for British Leyland.
I hope that the British public will not be misled by any publicity campaign into thinking that in this present age there can ever be such a thing as a 100 per cent. British car, or that, if there were, it would be desirable or offered at the right price.
I now turn to the Statutory Instrument about the NEB for what I regard as absolutely essential funds if the British Leyland case is regarded as sound. It seems to me that in recent months the NEB has taken a turn very much for the better. It is no longer behaving as a self-generating organisation appearing to go its own way under very headstrong leadership. It is now an obedient, imaginative and well-tuned instrument of the policy of the Government for the time being with, I suspect, a sensible and close eye on any possible future Government.
If we now have a consensus NEB—as I pray we have—this cannot fail to be for the good of the country. There are always those hon. Members, such as the right hon. Member for Leeds, North-East, who say "But there are many eager merchant banks and other finance institutions desperately anxious to lay out their money in the same areas as the NEB." If there are, they have not shown much signs of activity in some very important areas. I can understand why.

I make no criticism of the merchant banks and finance houses.
I take just one example, the leather tanning industry. I cannot conceive that any merchant banker in his senses, with plenty of other opportunities for deploying his money and skill, would have such a masochist complex as to try to reorganise the British leather tanning industry, which is bound to be a bed of nails—if that is not a self-contradiction—for some years to come and has already landed the NEB in the very painful task of agreeing to redundancy notices for many hundreds of hard-working people in Beverley and other parts of North Humberside.
It is simply because only a public corporation can hope, with luck and great skill, to be tolerated in a role like that that the NEB has a unique role. If the people of Beverley were told that financiers of the City of London had insisted upon 700 of them getting the sack, there would have been a series of sit-ins which would have lasted from now until the summer holidays. But a public corporation—doing it admittedly with great regret—is at least able to say with a perfectly honest countenance that it is doing this in the public interest That is one of the virtues of the NEB.
I am glad that with regard to its particular guideline on promoting employment Sir Leslie Murphy and his team are taking an overall view and are not assuming by a narrow interpretation that a positive duty to promote employment means that they must go running around the country collecting every lame duck that is about to give people the push. They take a much broader view, and I am quite sure that they are right.
The fact is that in the present industrial climate, and with all the depressing factors—many of them not under our control—in the rest of the world we need a public body with relatively modest resources of this kind available to fill the gaps which in a mixed economy are inevitably left by perfectly enterprising finance houses and other organs of private enterprise.
If the Conservative segment of the Opposition does not like this particular form of NEB, it is incumbent upon it to tell the House what it would put in its place. Indeed, before the end of this debate I hope that we shall hear from


the Conservative Front Bench what its plans are for the NEB if it falls to the Conservative Party to decide these matters in future.
In our view, the NEB has taken some splendid steps forward in the last few months, especially in negotiating with the Secretary of State its right to sell off up to £1 million in any one case of shareholdings without anything more than his formal consent. In my part of industrial West Yorkshire that has considerably increased industrial confidence in the role of the NEB.
With those reasons in mind I shall tonight recommend my right hon. and hon. Friends to support the Government on both the Statutory Instrument and on the order.

6.55 p.m.

Mr. Arthur Blenkinsop: This has been a fascinating debate because we have been confronted from the Conservative Opposition by what amounts to an unholy compromise which they have reached. The right hon. Member for Leeds, North-East (Sir K. Joseph), in delivering his vigorous attack upon the Government—and apparently assuming a holier-than-thou attitude about the whole procedure—clearly had been grudgingly won over to agree to one of these Statutory Instruments on the understanding that he would be able to get support from Conservative Members on the other. There was the world of difference between the attitude exhibited by the right hon. Member for Leeds. North-East and the attitude of the right hon. Member for Worcester (Mr. Walker), who at any rate appeared to be putting a fairly rational case in his brief but vigorous intervention.
I wish—at any rate on this subject and on the work of the NEB—that at least there was greater understanding of its overall role. For example, the hon. Member for Birmingham, Stechford (Mr. MacKay)—I hope I did not misunderstand him—apparently had the impression that NEB funds were being used for the shipbuilding industry. He said that quite specifically. But, of course, NEB funds are not used for that purpose. That is quite clear.
As someone who comes from the North and North-East, I want to raise specifically

matters that were referred to by my right hon. Friend about some new avenues of work for the NEB, namely, the setting up at the beginning of the year of the new regional board in the North which is comparable with the board that has been set up in the North-West. It is true that the establishment of that body has not been greeted with overwhelming excitement in the North-East. I believe that is for two major reasons. First, in the North we are concerned about the number of bodies which already exist which appear to be in danger of overlapping in some of their work. We are concerned lest this new board should merely be seen as yet another body added to the existing number. We in the North are very eager to do some rationalisation in that sense in order to secure a clear voice for the whole region comparable with the strong voice that we believe Scotland can now express through its development agency.
Secondly, our judgment about the effectiveness of the work of the regional NEB will very much depend upon its success. It has been in existence for only a short time—a matter of about three months—and it would be unfair to judge it by that very short period. But I hope that we shall have a continuing look at the way in which it finds it possible to generate new activity, because I feel that it should not regard it as its job simply to wait for people to come to it. Rather I hope that it will adopt a more aggressive line and seek to find new avenues to development in the Northern region.
We are concerned that we have a number of different bodies in the North. We have, for example, the departmental Ministries already with some independent rights of decision making, especially in terms of the Industry Act and the decision under the Act. We have the Industrial Estates Corporation. We have on an advisory basis the Northern Economic Planning Council, and we have promotional bodies such as the North of England Development Council. There is a danger that proliferation of bodies of this sort can lead not to clarity of decision and action but to some confusion.
We are eager to work out ways in which we can get a better combination—without necessarily further legislative action but administratively—to secure the


greater clarity which we think will be very much to the benefit of the region. In the meantime, naturally we welcome any efforts which the NEB can carry through on its new regional basis. We welcome that it has as a body modest independent rights of action of its own for authorising projects within the £500,000 figure which possibly is not all that much today but which gives it some independent rights of action. We are deeply concerned lest the Conservative Party should succeed in trying to deny the NEB overall the necessary resources not only for the Leyland project but for the many other promising projects which it has helped stimulate and in some cases to rescue. We are deeply concerned in the North that they should have the full backing of this House.

7.0 p.m.

Mr. Hal Miller: As one who voted for the Ryder Report in the first place, I do not think that we should be too apologetic today when we come to another crossroads in the history of Leyland, and I do not think that we should put on the hair shirt too publicly.
I should like to take this opportunity to pay tribute to those who have tried to bring that plan to fruition and who have laid the groundwork on which the new team will be able to base its drive for success. It would be very remiss to let this occasion pass 'without paying such a tribute to those who have worked so hard and laid strong foundations the reward of which others are now about to reap.
But we have again been brought face to face with a situation in which this House has great difficulty in deciding how to disburse such large sums of public money coupled with retaining some accountability to our own constituents for the use of their taxes. I thought that that difficulty was illustrated in the remarks of the hon. Member for Colne Valley (Mr. Wainwright), who showed no concern for the proper husbandry of public money but appeared to be willing to go along with whatever was suggested, without any reservation.

Mr. Richard Wainwright: Mr. Richard Wainwright rose—

Mr. Hal Miller: Apparently we are to have some clarification.

Mr. Wainwright: It may be that the hon. Member was asleep when I cited

the meticulous arrangements that the NEB was making to monitor both the current operations and the capital expenditure of British Leyland.

Mr. Miller: I distinctly heard the hon. Member characterise the Conservative Party as the party of business. I was merely pointing out that we were a little more careful of the taxpayers' money than he appeared to be suggesting that his party was.
The difficulty to which we should be addressing ourselves is how Parliament is to arrange itself and constitute the body for the purpose to ensure that public money disbursed in this way is suitably monitored. Obviously across the Floor of this House we are in no position to discuss the various details of models or uses of expenditure or, indeed, the confidential nature of some of these uses. But we need to consider some means whereby we can exercise our responsibilities for public expenditure.
In the debate on the Eighth Report of the Public Accounts Committee I drew attention to this and I was disappointed not to have any reply on that occasion. I hope that we shall hear some comment about it later tonight. I also made it clear on that occasion that it was no longer realistic to expect the Leyland operation to continue on the basis of drip feed. That is one major reason why I support the proposal before the House for an injection of equity.
Before I leave the Ryder plan, I ought to remind the House that that was based on over-optimistic assumptions. It was characterised as a blue skies forecast. However, it takes a very considerable time for attitudes to change, and even the great new broom has not managed to change all the attitudes, as was evidenced by the refusal of the productivity scheme by the work force at the end of last week. So do not let us go overboard in this direction, because some people, including myself, may have been too optimistic about the previous scheme. It takes a long time for attitudes to change and for results to be achieved in that direction.
Moving on from Parliament, I must remind right hon. and hon. Members that there is a severe limit to public funds, and the £850 million which is being made available to Leyland in the next 12


months and the funds which the Secretary of State has announced already for British Steel in round figures have effectively pre-empted one year of the gain from North Sea oil. There is therefore a real limit on the funds which can be made available.
It was for this reason that some of my right hon. and hon. Friends were encouraged to inquire whether some of the operations not directly connected with vehicle manufacture might not be able to satisfy their investment needs to the extent which they themselves would wish by being freed from the shackle of public investment and being allowed to seek their fortunes on the market. I cannot see how, for instance, the separation of commercial refrigeration or construction equipment would affect the morale of those working in the motor force. This is another respect with which I disagree with the hon. Member for Colne Valley.
I do not suggest that this could be done today, but it could and should be organised on such a basis that it ought to be possible, because there is a limit to the public funds which can be made available, and it may be that the growth of these companies is being inhibited unduly by the need to spread the limited amount of butter.
Moving on to British Leyland, it is difficult for the House to form an effective judgment when the detail before right hon. and hon. Members is necessarily scarce. We have no indication of how much of this money is to go for working capital and how much is for investment, and we are lacking various other information which an ordinary shareholder would expect in a prospectus from a company seeking to acquire additional finance.
Here is another area where I feel that we in Parliament are not living up to our responsibilities. But part of the lack of information which concerns me is that we do not know how much of this new investment may be going into competing with already existing industries. I have in mind components, for example. I know that this is a very real worry. Several large component makers have approached me in the past year, and there have been deputations to the NEB. I hope to be able to catch the ear of the

Minister who is to reply so that we may have some information about whether any of this investment is to go into component manufacture and compete with existing firms. I shall resist any suggestion that part of any run-down in Leyland's work force should be mitigated by transferring workers to component manufacture. The only result of that would be to put people out of work in those factories with which they would be competing. That has been confirmed to me on a series of recent visits to our major component makers. We should like some assurance on that score.
We have not been able to identify from the figures before us the relative profitability of any of the operations. I would resent the perhaps facile assumption that all is well in Rover and Jaguar and that it is only Austin and Morris that are holding back the whole body corporate from success. That has not been proven to us. There is another area where adequate information has not been available.
The National Enterprise Board in its report has not considered adequately, as far as I can judge, British Leyland's position as a European car maker in the European car market. There is a serious danger of over-production of cars in Europe over the next five years. I am not convinced that British Leyland's production plans have been considered in that light. I, like the hon. Member for Colne Valley, would wish to go further and have some reassurance that there is a more positive move towards ensuring that British Leyland is an effective part of the European motor car industry. I do not believe that it will be able to survive long without having, as it were, at least two legs on which to stand.
One of the reasons for that is the colossal size of the investment that is now required to mount new technology. It is significant that Renault had to co-operate with Peugeot and Volvo to produce a new six-cylinder engine. It is likely that there will have to be further co-operative efforts of that sort, because the scale of investment that is now required is too much for any one company to find, even one backed with public funds. That does not appear to have been considered in the NEB report.
In speaking of the NEB report, I emphasise the remarks made by my right


hon. Friend the Member for Leeds, North-East (Sir K. Joseph) on productivity. It is an issue that has been brought to my attention recently by the works committee at Longbridge, which is most concerned that the productivity aim is not ambitious enough. The European productivity, with which comparisons are constantly being made, will have made further advances on the basis of investment and new technology even during the period of the Edwardes plan. That factor has not been considered sufficiently in the report let alone answered.
There are many queries and we are being asked to make an act of faith. The unfortunate probability is that we shall be asked to renew it at regular intervals. For example, next year we have an additional £400 million to provide in one form or another. How are we to fulfil our duty to our constituents and satisfy ourselves on some of the major points that I, with others, have been trying to make this evening?
From the fairly close observation that I try to keep on the operation of the company and of those who work in it, and the contacts that I have with them, I believe that real progress has been made, although the extent of it is not yet immediately apparent. Progress has been made especially in participation. One of the worries of the works committee was that the new management might mean going backwards in that regard when it felt that advances had been made. I was happy to receive assurances on that score.
We now have to face that further funds are needed for the enterprise to continue. It must be observed that an equivalent amount of investment is being required from dealers, who will have to revamp the whole of their dealership structure. Many of them will be required to make a considerable investment both in stock and in capital equipment. The employees of the dealers are equivalent to those who work in Leyland's manufacturing assembly plants. The same thing may be said for the component suppliers.
Therefore, we can assure ourselves that public money is being used in some sense as a seed corn. It is promoting a great deal of additional private complementary investment to go along with it both at the beginning and end of the manufacturing process.
It is fair to say that we have a duty to sustain the confidence of those involved in the whole chain from the supplier through the assembler through the dealer to the customer. We have a duty to sustain their confidence, and tonight we should show that we have an equal commitment.

7.16 p.m.

Mr. Peter Brooke: It is always a pleasure to follow my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) in debates on this subject. My hon. Friend's comments on the industry are always well informed. His frankness and candour in reminding the House of his support for the Ryder plan were commendable.
I have to declare an immediate interest as someone who has earned his living as a management consultant. Within the past five years my firm certainly served British Leyland, Ferranti and Rolls-Royce, and indirectly the National Enterprise Board, although I do not think that we are serving any of those clients at present.
Anyone taking part in the debate must do so in the profound hope that British Leyland will be restored to health. As many hon. Members, including my hon. Friends, have reminded us already, many jobs are at stake. For patriots the name British is attached to the company, and that is important, too. It should go without saying that British Leyland's best prospects of being restored to health depend on the company making things that world-wide consumers want and on the company selling them profitably at prices that world-wide consumers find attractive. Any other outcome is both temporary and agonising.
Labour Members may reasonably ask of us on the Opposition Benches our attitude to the manufacturing side of the public sector. My own view of when Governments should intervene in the private sector of industry coincides with that expressed recently by a distinguished industrialist speaking on this subject. I shall not give his name for the occasion was private, but his audience embraced both the private sector and the public sector. He said that Governments should intervene in industry when, and only when, the free market was either not


achieving the results that were needed on objective criteria or was not achieving them fast enough. The Conservative Government's intervention in Rolls-Royce, given both the commercial and especially the defence clientele of that company, was a classic application of that theory. No doubt the present Government would argue that British Leyland is a similar case.
Before I leave the level of theory I add one other footnote, We hear a great deal from the Labour Benches about Government subsidies to the private sector. I hope that Labour Members will pause to remember when they contemplate the reverse—the consequences of the Government intervention in a free market—that in the majority of top public sector jobs we now have the private sector subsidising the public, with executives plucked from the private sector to chair Rolls-Royce, British Steel, British Airways, British Rail, the Post Office, Alfred Herbert and now British Leyland. They are either seconded directly by their companies or are able to take on the jobs at the relative pittances that the public sector offers because they have accumulated some degree of personal wealth in the private sectors before they cross over.
There are a number of reasons why Government intervention in industry should be as brief as possible. One of the most cogent is the commercial embarrassment having to do corporate planning under the searchlights of Parliament. The NEB statement, which forms one of the background papers to this debate, is a vivid illustration. It is concise, well-written and necessarily almost totally uninformative. The guts of the NEB's decision-making—indeed, the nature of the NEB's decisions beyond the reiterated statements of faith—have perforce to be omitted. We are asked to pass judgment blindly on facts that we cannot be permitted to see.
What follows, therefore, is inference from the visible elements of the iceberg to what lies below. The prime responsibility of the NEB, we are told in paragraph 1.1 of the statement, is "to promote" the company's "efficient management". In paragraph 1.2, we are given wider social and industrial objectives of the NEB. In neither paragraph does the word "profit" appear.
At the last election the present Secretary of State for Energy, who caught the Moses mode rather earlier than some of his friends, prowled round the gates of the public sector and, as Joshua at Jericho arranged for the sun to be stopped in its tracks, so the Secretary of State for Energy assured the workers in the public sector that they had been liberated by a Labour Government from the laws of profit and loss.
The management and workers of Rolls-Royce, on the basis of last week's results—I quote Rolls-Royce as the NEB's other major foster child—have fortunately paid more attention and heed to Adam Smith than to the right hon. Gentleman. But it is devoutly to be hoped that, though the NEB cannot bring itself to mention the word "profit" in the first two paragraphs, and even in paragraph 11.15 can only bring itself to refer to a "financial duty" and to a return on capital, what it is opaquely talking about is a return to profitability. We must hope that Mr. Edwardes is not so pusillanimous in his language.
The next crucial paragraphs in the NEB's statement occur in section 4—"Organisation". In paragraph 4.1 the NEB states:
The new management considered that British Leyland's poblems were in part due to the structure of the oganisation.
After expanding on that, it goes on in paragraph 4.2:
These initial conclusions were the subject of detailed study by a special task force within the company. The outcome has been a decision to move during the course of the year to a new organisation with major consequences for Cars and for International.
The apparent implication of this, the apparent sequitur, is that new management made a study and the outcome is a new organisation. My information is that the task force was in being and that more than one firm of consultants had been employed prior to the new management's arrival. My further information is that the task force had taken the view—as one would expect from knowledge of how the 10 car companies in the world which are larger than British Leyland, with the limited exception of General Motors which is large enough to be an exception in the way that it manages itself to any general rule, organise themselves that car manufacturing operations are so integrated one part with another that true


decentralisation to genuinely independent units—the small is beautiful syndrome—is impossible. It was at that point that new management arrived.
In paragraph 4.2 of the NEB's statement the word "outcome" is the mot juste since it remains an accurate description of a new development while delicately concealing that the conclusions of the study were somewhat at variance with the evidence in it. As the NEB statement also remarks in a happy choice of words, the consequences of the new organisation for Cars and for International are major. As the No. 11 in world markets and much the smallest of the majors, British Leyland is seeking to prove that the smallest, like General Motors the largest, can make themselves exceptions to the general rule of organisation in this industry.
In fact, as always, appearances somewhat belie reality. Whereas British Leyland cried out for centralisation when the scatter of companies was originally put together and never got that centralisation in any proper sense, so now such decentralisation as is occurring is going to be severely restricted.
The break-up of British Leyland International as a marketing entity, with the potential obligation on a dealer in, say, Austria, to communicate and correspond in future with half a dozen people in the United Kingdom as against a single one, is nicely balanced by the news that a senior executive has been expensively brought in from outside to co-ordinate—I ask the House to note the word "co-ordinate"—franchises.
Product strategy and advanced engineering—I quote from paragraph 4.5 —are likewise reserved powers rather than devolved ones. Anyone who knows Mr. Edwardes' prior reputation as a strong chief executive would scarcely have expected otherwise, but it is legitimate to raise two questions.
First, is competition between rival car companies the best way of deploying scarce economic and engineering resources? Secondly, when manufacturing has been British Leyland's historic Achilles heel and when the reorganisation which has been set in motion has seen such a haemorrhage of what manufacturing talent the company had, are the Government and the NEB confident that there

is enough manufacturing ability left in the company to staff these new decentralised units?
In section 6 of the statement we are understandably given only the most outline concepts of product strategy. But the inevitable concentration on the short term, given the critical position in the market place, causes one to wonder how far product development will look forward to the 1980s instead of simply seeking to remedy the deficiencies and what the product strategists would call the "me-too-isms" of the 1970s.
At the end of the day the NEB's and the Government's case comes down to backing a single individual. Unlike aerospace where the NEB employs Mr. Lickley, lately a senior executive from the higher echelons of Hawker Siddeley, the NEB's ranks do not include senior motor industry experience. Its recruit from motoring journalism, Mr. Ensor, has left, and its recruit from the industry, Mr. Calver, has gone back to British Leyland.
The NEB acknowledges that its case is one of faith. I do not subscribe to the theory that individuals cannot transfer successfully from one industry to another. There are frequently cases for making such a transfer. But what we lack if we do that—and the NEB's paucity of motor industry experience compounds this—is the instinct that comes of long years in the industry—the sort of instinct that made the Mustang so immensely profitable a model not only because it was a superb product but because Ford's management had the courage to lay down a second production line on the basis of only two days' sales.
I am not troubled by the potential confusions in Mr. Edwardes' plan of organisation unless Mr. Edwardes becomes confused by them himself. The fact that some of the organisational ice is thin is irrelevant if Mr. Edwardes puts it out of bounds to skaters. What he is doing—and it is the sign of a leader anywhere—is sending out signals throughout his organisation of the style in which he intends to run the company. Like many of my hon. Friends, I like the style. I am more surprised that Government Members, who I thought found leadership an unfashionable concept, are so enthusiastic about putting all their chips on a


leader. That is what the NEB and the Government are asking the House to do.
Of course, it is risky. That is why there will be notices saying that the ice is thin. But the NEB and the Government are lucky that their earlier interventions such as those involving Rolls-Royce and Ferranti have come right at the right time. If Governments should intervene in industry when they are needed, so they should disengage when they are no longer needed, There can be no happier way of backing British Leyland, risks and all—and I should like to see the House backing British Leyland—than from the handsome return that the Government could now receive from having backed Rolls-Royce earlier. The coincidental success of Rolls-Royce Motors is an admirable augury for this procedure.

7.31 p.m.

Mr. Eric Ogden: I shall take two points from the cogent speech by the hon. Member for the City of London and Westminster, South (Mr. Brooke). He criticised the Government for poaching the private sector in order to provide management for the public sector. I agree with him on that, to a degree. I do not agree with him in his criticism of whom they take and for the reasons that they take them. But somewhere along the line my colleagues in the trade union movement have failed to use the movement to provide alternative managers. I do not know whether that is because in recent years members from the union side have already gone into lower management.
Something that we on this side of the House can do is to encourage the trade unions to provide management skills so that each time someone has to be appointed either to high or middle management my right hon. and hon. Friends on the Front Bench are not criticised for going to the private sector to provide management in nationalised industry.
The hon. Member for City of London and Westminster, South was a little unfair when he seemed to suggest that only an engineer, preferably a motor engineer, should be in charge of British Leyland or that only a chemist should be in charge of Distillers.

Mr. Brooke: I did not intend to give that impression. I intended to say that

one of the disadvantages about the present situation is that the NEB does not have that type of experience within its own ranks.

Mr. Ogden: I agree that within the ranks of the NEB there should be the whole range of experience. I am glad that the hon. Member confirmed that it is not necessary to have an engineer in charge of an engineering company.
I proposed to quote to the hon. Member the advice of Sir Arnold Weinstock, who said on one occasion that he knew little about electrical engineering and that his purpose as managing director of the group was to provide the organisation. Regardless of what the product was, he claimed that if he got the organisation right and was able to employ those in the higher ranks of management who had the skills, he would provide the product that people wanted, at the time that people wanted it, at the price that people were prepared to pay, and, incidentally, profit would flow automatically. That was the advice that I was offered by somebody who is more likely to be in political sympathy with the hon. Member than he is with me.
In party politics only seldom does the shadow spokesman on the environment become the Minister when his party is in office. The same applies to a Shadow Foreign Secretary becoming Foreign Secretary. In the present circumstances, it will be a long time before the hon. Member for Kingston upon Thames (Mr. Lamont), who is shadowing on the Opposition Front Bench, will take over on the Government Front Bench. This is another argument. The argument in political parties seems to be the same as that of Sir Arnold Weinstock. The subject and product seem to be less important than a manager's organising and managerial capabilities.
The hon. Member for City of London and Westminster, South said that intervention by the Government in industry should be as temporary as possible. Some of his colleagues are always complaining about Government intervention in industry. Some industrialists complain about Government interference publicly, but they are often first in the queue at Government Departments asking for grants and help of one kind or another. I make those remarks to show the hon.


Member that I was listening to his speech, although I was making some last-minute notes as he was speaking.
The Government's proposal seems to have approval on both sides of the House, for different reasons. I support the proposal to provide more capital for the National Enterprise Board and, through it, more capital for British Leyland.
I ask the Minister to confirm that the North-West regional board of the NEB will receive a major share of the funds available for direct investment on Merseyside and the North-West. I am not asking this directly in the usual way, or during an Adjournment debate, or over the telephone to his office. The Minister will recall the Adjournment debate in March and the information that he gave. I ask for confirmation that the funds will not be limited to manufacturing industry alone but that they can and should be made available to service industries in the North-West.
The hon. Member for Bromsgrove and Redditch (Mr. Miller) called the Government proposal an act of faith, not, he hoped, an auto de fe. It is a calculated risk. Some time ago we heard Mr. Michael Edwardes saying that when he came back to the Government, if the Secretary of State asked him what proof he had that taxpayers' money would produce the result that he wanted, British Leyland would have to say that it could give no such guarantee. Michael Edwardes was asking the Government to take that calculated risk. Perhaps in 12 months' time he would be able to say that it would or would not work. Now we have to make a choice. We either do nothing and let British Leyland sink or we exercise an act of faith, take a calculated risk, and the money must be provided. Unless we provide the funds, there is no hope of survival or success.
Not only British Leyland is involved. Subsidiary companies and other areas are involved. We also have to make it clear that providing capital is no guarantee that the company, management, unions, engineers, dealers and anyone else involved will be able to do the job. We can only make it possible for them to try to do the job. It will be done only if there is real effort, co-ordination and determination to work out a way of providing the cars, the motor vehicles, and the components that people want to buy,

not because there is an embargo on other cars coming into the country, but because British cars and vehicles are the ones people want to buy. We have to ensure that people can buy these products when they want them, not in six or 12 months' time. We have to ensure that they are the colour and quality that people want to buy. Only when we can produce the vehicles at the price and quality and with the delivery date that people require will British Leyland be a success. That same principle applies to any other industry. That success can be achieved only by those outside the House, not by those inside. We are taking a calculated risk.

Mr. Nick Budgen: Mr. Nick Budgen (Wolverhampton, South-West) rose—

Mr. Deputy Speaker (Sir Myer Galpern): Mr. Budgen.

Mr. Ogden: rose—

Mr. Deputy Speaker: I am sorry. I thought that the hon. Gentleman was concluding his speech. It sounded like his peroration. Was he giving way for an intervention?

Mr. Ogden: Four Opposition Members were nodding their heads as I was speaking, Mr. Deputy Speaker, and that does not happen too often. I thought that one of them was trying to help me by interrupting, so I was giving way to him. I shall not be too long, Mr. Deputy Speaker.
I hope that the House will accept that the support that I have expressed for British Leyland is in spite of the decision of British Leyland management to put forward a proposal to close the Speke No. 2 plant. This has been raised in the House not only once by my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) today, but on a score of occasions, and has been hammered home time and again.
At first, when this proposal was made public, it seemed to be—as all the inferences of anyone outside the House, from reading the statement, would be—that it was proposed to close British Leyland Speke No. 2 plant because of its bad record of industrial relations. It was only after two meetings of Merseyside Members of Parliament, first with Mr. Pat Lowry and later, at some ungodly hour in the morning, with British Leyland's manager, Michael Edwardes, that


it was made quite clear that industrial relations, productivity and all the other things that have been mentioned in the report had nothing to do with the decision to announce the proposed closure of Speke No. 2.
That British Leyland plant is the second most modern motor plant in the United Kingdom, built and intended to produce 2,000 cars per week of three varieties—the TR7 hard top, the TR7 soft top and the Lynx—and now, because of factors outside the Leyland company management control, it was proposed to produce only 700 cars per week. A plant for a market of 2,000 cars a week now has a market of 700 per week. The economics are there for anyone to read and the 700 cars can be produced by spare plant in the Midlands.
That is the reason for the proposal to close Speke No. 2. It has not been accepted on Merseyside. We are told that there are products from parts of the British Leyland network for which people are waiting six months, 12 months and 18 months—and not only for buses or the Land Rover. There is surely some way, inside the British Leyland organisation, in which British Leyland can use the most modern plant on Merseyside and the second most modern car plant in Europe to provide the production for British Leyland vehicles for which people are waiting.
There is discussion with the unions, and it is not the job of Members of Parliament to do the job of either management or the trade unions. We can help. We can carry messages. We can try to get a better understanding. But it is not for us to do the one job or the other. We are middle men and, as usual, we get clobbered from both sides. Certainly it is time that a great deal more information was provided by British Leyland managers to their people on Merseyside.
There are parts of British Leyland that cannot produce what is wanted. We are simply saying that here we have a plant of skilled people which should be used for production that is wanted by other parts of BLMC, and which they are not able to provide.
Coming from Merseyside, perhaps I could make one or two other comments

about the use of NEB money. NEB money is invested in Merseyside not only through British Leyland. Will my hon. Friend again put on record the help that has come to Merseyside and the North-West through the Government and NEB, but not only for Cammell Laird, Shotton, the Mersey Docks and Harbour Board, Tate and Lyle and GEC, and many other companies?
I make one specific request. I am told that the Laird Group, which was saved in 1966 by Government intervention, is now going forward into the production of a bus—public transport buses. I am not certain whether it is the Metropolitan, but I am told that the group has a new model on the market. Perhaps my hon. Friend will have a word with the management. It might be possible to use part of the facilities of Speke No. 2 to provide the plant and the production of Laird buses, under whichever title they happen to go.
As the beginning of my peroration—perhaps that will help Opposition Members; they must have patience—let me say that my hon. Friend the Member for Garston reported directly to the Government Front Bench the feelings expressed at a Merseyside meeting yesterday morning. It was a conference of trade unionists, members of the Labour Party, representatives of district officials, councillors and many people from a whole range of walks of life—all involved with old concerned about employment on Merseyside. A senior shop steward from British Leyland at Longbridge suggested that it was time that the Government began to use some of their money from North Sea oil to put into British Leyland. We had to remind him of the £230 million made available a fortnight ago and the latest investment of £800 million over the next four years.
In other words, the Government are getting the blame for what goes wrong and they are getting none of the credit for what is going right. It will be little comfort for the Opposition, but it was recognised by everyone at the meeting that if the Conservative Party ever gets into power our difficulties will be a great deal worse, both in the short term and in the long term.
What efforts are being made to get free, voluntary planning agreements between a particular company, a particular industry


or a particular sector on Merseyside and in the North-West and the Government? I cite the example of my own union. In the coal industry there has been a complete agreement among the Government, the National Coal Board and the unions, about investment, productivity and production over the next few years. If that kind of thing could be done with GEC, Plessey and Lucas, we would have many fewer of the problems that we have at present. I again ask the Minister to use all his endeavours to achieve better co-ordination between Ministers and the North-West, and to make even more certain that the money to be provided through these grants and orders is not restricted to manufacturing industries. My belief is that the hope of ending unemployment in the North-West will depend more on using the service industries than it does on the manufacturing industries.
We have problems. There is no need to rehearse them again because, as my hon. Friend the Member for Garston has said on more than one occasion, we Merseyside Labour Members have beaten a regular track to ministerial doors and will continue to do so. However, with this aid, there is some hope. Without it, there is no hope. With the hon. Member for Kingston upon Thames—this is no personal reflection—and the Conservative Party behind him, there would never be any hope for Merseyside.

7.47 p.m.

Mr. Nick Budgen: I start by declaring an interest in that my brother is employed by British Leyland. I also declare an interest by saying that I have been amongst the first of my party to vote against the increasing subsidies that have been accorded to British Leyland.
Adapting a phrase, I believe that subsidies are twice cursed. They are cursed by he who takes and cursed by he who gives. For he who takes—namely, British Leyland—subsidies have caused British Leyland to avoid those harsh decisions that it ought to have taken. Subsidies have eroded the relationship between men and management. They have caused men to go for decisions not to their management but to Members of Parliament. They have caused men and management not to consider how they might better use their

assets but to see how better they could lobby Parliament.
I believe that continual subsidies to British Leyland or to any other sector of the economy will be bad for those sectors that receive it and very bad for the country as a whole in giving those subsidies.
As my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) said, the subsidies have to be raised by taxation—and, God knows, there is a big enough cry for the reduction of taxation at present—or by borrowing—and, God knows, there is a big enough cry for lower interest rates so as to encourage more investment—or, worst of all, by printing money—and, God knows, we have a high enough rate of inflation and we have in prospect, as the editor of The Times says, a 15 per cent. rate of inflation next year.
Therefore, what are Opposition Members to do in thinking about these two matters and in supporting what Mr. Edwardes himself describes as an act of faith? Of course, the fact is that we know that as the custodians of taxpayers' money we are being asked to take a tremendous gamble. If it were not a tremendous gamble, the money could be raised in the City and from private investors. In my opinion, therefore, the position of the Tory Party is both illogical and necessary. It is illogical because we draw a distinction which in theory cannot properly be drawn between the NEB order and the Section 8 order.
I entirely agree with the analysis by my right hon. Friend the Member for Leeds, North-East of the unnecessary quality of the proposal to increase the funds for the NEB. It is plain that, first, it is based on a false philosophy. If there is a philosophy for the NEB, it should be based on the proposition that companies may temporarily fail and need support and should be given a crutch—but only for a short time. There should be no long-term or dramatic proposals for a continuing role for the NEB. So I wholly reject the Secretary of State's longterm philosophy.
But even if one concedes the NEB this short-term resuscitating role, the £300 million is unnecessary and the basis of the application must be that more money is wanted for other industries. Even if that is not so, some firms and industries in


the NEB stable could be sold off. It is not for us to say which, and it is dangerous for politicians to be too precise about management decisions. But even Ferranti could be sold off. I agree with my right hon. Friend about that.
Illogically, my right hon. Friend takes a different view about the Section 8 application. One can describe British Leyland as a conglomerate or holding company like the NEB itself. It has its Special Products Division, its division dealing with buses and trucks, and Jaguar and Land Rover. It also has substantial capacity to manufacture components, and it has foundries. It is not for politicians to say how they should be disposed of, but money could be raised by hiving off parts of British Leyland.
I was therefore concerned about how to vote on the Section 8 order. Illogical though I regard it, I shall abstain. The very illogicality of our position shows what the position will be under the next Tory Administration. There is a danger of our being misrepresented. One misrepresentation favoured by the Prime Minister is that, if the Tory Party wins the next General Election, subsidies and support will be cut off, the West Midlands will be an industrial wasteland and its inhabitants will be put on the dole queue.
The subsidies and support given by the present Government are very high. Table 6 of "The Government's Expenditure Plans", Cmnd. 6721, Volume I, shows that, at 1976 survey prices, expenditure under this item is running at about £3 billion a year, or about 6 per cent. of Government expenditure. If that whole programme were cut back on the day of the General Election, the industrial West Midlands would indeed become a wasteland. That is not the intention. On the other side of the argument, some who broadly share my liberal economic views might fear that, after the vote tonight, the Tory Party would do nothing about cutting the subsidies and supports which are distorting our economy.
But the reality is different—an illogical compromise like that which we shall make tonight. Whether we like it or not, the subsidies have been given. British Leyland has been effectively nationalised and we have to deal with the situation as it is and not as we would wish it to be.
Therefore, I hope that the message which goes out tonight is that the Tory Party may be acting illogically but also, as practical politicians should, that we shall be planning a phased, determined withdrawal from the public sector, and that we shall not cut off the subsidies overnight. Nor shall we say that it will be done immediately only to reverse our programme and adopt a different philosophy only six months later, when the barons of the TUC and the CBI line up at No. 10 Downing Street to put the pressure on.
The difficult, compassionate and honest answer is that we shall have to disengage slowly. British Leyland, Alfred Herbert and all the clients of the NEB are drug addicts and they have had a great deal of the drug of the taxpayers' money. One cannot take the drug from the addict immediately, but in his interests and the interests of those pushing the drug the thing must be stopped, firmly and slowly.

The Under-Secretary of State for Industry (Mr. Les Huckfield): The hon. Gentleman is making a coherent and logical exposition and I am sure that we are all following it with fascination. What then, in the end, having taken away the drugs and proposed to remove the source of the drugs, would he do with the NEB?

Mr. Budgen: I hope that it will be a very small concern. I hope that it will exist, because there will always be people in my party who believe in its limited and temporary resuscitating role. I am a reluctant supporter even of that role, but my party, like the Minister's party, is a coalition and there will always be those who vehemently disagree with my perhaps over-purist view of the economy. Therefore, I dare say that the NEB will exist for some time. I want to ensure that it has a very limited and declining role.
I want it to be known throughout the West Midlands that the Tory Party understands that component manufacturers, dealers, a whole host of persons, have contractual relationships with Albert Herbert, with British Leyland, with other clients of the Government. Plainly, others who are in contractual relationship with or who work for those enterprises must taken account of a changed climate. There can be no question of immediately turning the West Midlands—in the dramatic phrase of the Prime Minister—into an industrial wasteland Equally, there can


be no question of doing nothing. We shall have to conduct a skilled, phased and sometimes illogical withdrawal. This is the beginning of it.

8.1 p.m.

Mr. Michael Grylls: So much has been said about Leyland during the debate that I shall say very little about it but concentrate, instead, on the National Enterprise Board.
I believe that there is, rightly, an aura of optimism about Leyland. Mr. Edwardes is to be congratulated on having been largely responsible for getting that aura going and inducing a feeling of optimism within the organisation. I believe that if he continues to make the right decisions, British Leyland can succeed into the 1980s.
Our role today as Members of Parliament is difficult, because there is relatively little that we can do. We have two choices. Either we turn the tap on of more taxpayers' money for British Leyland or we can decide not to turn it on. That is a very clear choice for us. We Tories believe, having supported Mr. Edwardes in his plan so far, that the time will come when he will need more money.
It is right to record that the Ryder plan is firmly dead and buried. Ryder is dead, long live Edwardes.
Today we are asked to vote £300 million of taxpayers' money to the National Enterprise Board. £150 million of it under Section 8 of the Industry Act. There are only two Members on the Labour Back Benches. That, perhaps, is an indication of the arrogance with which Government Members treat the House and their constituents whom they are supposed to be here to represent. There is supposed to be scrutiny in the granting of these vast sums of money.

Mr. Ioan Evans: Although the Opposition are mounting a massive campaign, there are only half a dozen Opposition Members present. Perhaps that should be put on the record.

Mr. Grylls: That is a 300 per cent. improvement on the attendance of Labour Members. I will not dwell on this matter. I will merely say that it is odd that more Members are not present in the House for this very important debate.
When one talks, as I have talked, about the Ryder plan being dead and buried and

our now having the Edwardes plan, it is necessary to recognise that this is a complete U-turn by the Government. This has not been made quite as clear as it might have been during the debate. In 1975, when the then Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), introduced the matter of the NEB, he said:
I would like to make it clear from the outset that following the initial injection of equity capital in 1975, the release of further stages of Government funding will be determined in the light of the contribution being made to the improvements in the performance of British Leyland by better industrial relations and higher productivity. This is a condition to which the Government attach great importance."—[Official Report, 24th Apil, 1975; Vol. 890, c. 1746.]
That was the basis of what the Government then put to the House about the Ryder plan, what was popularly called thereafter "the benchmark approach". As each benchmark was apparently reached, further sums of money were to be released. We were very sceptical about that, as indeed we were about the whole Ryder plan, because we did not believe that it was right or possible to turn investment on and off like a tap. Equally, we were in the difficulty that we believed that taxpayers' money should be controlled.
We now have a totally new scheme which was announced by the Secretary of State for Industry just before Easter—that a large sum of money will be injected and that a pistol will be levelled at us. It is in fact a pistol which is being levelled at the House tonight; it is being said to us "Either you agree to this large sum of money or you are not backing Mr. Edwardes." It puts us in a very difficult position.
I want to make my position quite clear. I believe, with the vast majority of hon. Members who have spoken, that Mr. Edwardes has made a promising start. However, it will be difficult to bring about a permanent improvement in British Leyland's market share. Paragraph 6.6 of the report of the National Enterprise Board says that the market will not be easily won back. We rejoice that British Leyland has had one good set of figures for a six-month period. However, that is not getting back to the market level which was visualised in the Ryder Report and which Mr. Edwardes himself rightly recognises will have to be achieved.
The total number of vehicles produced by British Leyland in 1976 and 1977 was 780,000. In those two years British Leyland achieved the lowest production figures over a period of 10 years. The figures for 1977 were exactly the same as those for 1976. In 1977, 250,000 vehicles were lost through bad industrial relations, strikes, stoppages, and the total failure to maintain continuity of production.
It may be that the corner has been turned by a miracle worker, and we are all sitting here today hoping that that is the case. We are all sitting here hoping as an act of faith that Mr. Edwardes will be able to increase productivity from the dismal figure of five vehicles per man year as compared with 30 in Europe and nearly 45 in Japan. There is a long way to go and the target set in the NEB report is on the low side.
It may be said "As you believe that Mr. Edwardes has made a good start, do you not think that he should have the money?" As I said earlier, this is the position in which we find ourselves. It is too soon to make a judgment on Mr. Edwardes after three months. He has produced a plan and a structure. He has had one set of figures. Based on the figures that the Secretary of State quoted today it is not proved that we have to vote this money at present.
On 3rd April the Secretary of State made this announcement:
In future the financial provision will be looked at annually, starting next November, the light of progress made and of future prospects." [Official Report, 3rd April 1978; Vol. 947, c. 3.]
That was an eminently reasonable position for the Secretary of State to have set out. If we had waited until November we would have had one year of the Edwardes regime. I should be happy to come here then, see what had happened to production and productivity, see whether in the year there had been very few strikes and, therefore, very few vehicles lost, and then made the act of faith. Tonight it is too soon to make the act of faith. It is unfair on Mr. Edwardes tonight and almost irresponsible for us as Members of Parliament to believe that we can do it. If we do so, we shall be mesmerised by what has happened over a few months only.
I want now to refer briefly to what my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) said about the rate of return on Leyland. On 3rd April the Secretary of State, in the same Written Answer to which I have referred, set the return for British Leyland as 10 per cent. return on capital to be earned by 1981. Something odd has happened, because in the 1975 scheme of arrangement the figure of 19·6 per cent. was set for 1981. Why has this target suddenly been lowered? The scheme of arrangement was a legal document signed in the High Court. It was a legal document on which the independent shareholders, of whom there are 100,000 still left, had to decide whether to take up the offer or hang on to their shares. One hundred thousand of them decided to hang on to their shares. That was very creditable of them. However, they did so on the basis of this document signed in the High Court. This afternoon, three years later, the Secretary of State said casually words to the effect that it will be not 19·6 per cent. but 10 per cent. The House of Commons appears to take it, and I think that it is very odd.
Unfortunately, the Secretary of State is not here, but his hon. Friend will no doubt take the message to him that this is something that he should study carefully because this scheme of arrangement is a legal document, and it and other matters in it refer to outside independent shareholders. The Minister is getting anxious. He is looking down the Chamber in the hope that help might be coming to him. He is lucky because he is surrounded by help and advice that can come to him easily. The independent shareholders who decided their future on the basis of a document do not have such advice. I hope that when the Minister winds up the debate he will give some real answers about the position of the independent shareholders. Not only is there a question of the rate of return but the actual monitoring referred to in the Prime Minister's statement of 24th April 1975, which I have read out, is in the scheme of arrangement, and therefore again those shareholders went into the scheme believing that it would be on a benchmark approach.
Thirdly, the point about the independent shareholders is that at that time there was on expected increase in the


capital during the first part of the Ryder plan, so they will have their shares even further diluted. The House of Commons is always proud to look after minorities, and this is a sizeable minority, consisting as it does of 100,000 people. I hope that we shall have some sensible, answers from the Minister this evening about exactly how the Government see the position.
The Government may say that the NEB is proposing to buy out the shareholders. That would be a pity because, as my right hon. Friend the Member for Worcester (Mr. Walker) said in his excellent speech at the beginning of the debate, it is important that they should be independent shareholders still and that the company should be quoted on the Stock Exchange. It is a 11 right for us in the Chamber tonight to say that, but we in this House have a duty to look after these people from the point of view of their financial position. They are mostly small shareholders, not large ones, and they put their savings into the company. I hope that the point that I have raised will be answered.
I come now to the question of the National Enterprise Board itself. As my right hon. Friend the Member for Leeds, North-East said, there is no argument whatsoever for increasing the borrowing limit from £700 million to £1,000 million. If one reads the NEB's report one is given the impression—and I am sure that this is not intended—that the only choice is to have £700 million or £1,000 million, and that if there is to be a change, it has to go in one jump to £1,000 million. That is not the position. Under the 1975 Act it could be increased by any figure between £700 million and a maximum of £1,000 million. The Secretary of State earlier this afternoon said—though we knew it because we have the order here—that the figure was to be increased to £1,000 million, but he gave no reason for doing that, and my right hon. Friend was right to pin him hard on this.
We are all accustomed to using these ridiculous figures of hundreds of millions and thousands of millions of pounds, and it is so easy for Ministers to come here and say that the borrowing limit is now £700 million and we shall make it £1,000 million. They will say, "That gives us lots of leeway, that is easy, and

it is good, and we do not have to come back to the House of Commons again".
The way in which the Secretary of State dealt with this matter this afternoon was nothing short of scandalous. Apart from any other matter to which I shall come, for the right hon. Gentleman to come here and say "I shall have the higher figure. That will sort it all out and give the NEB the absolute maximum to be able to get on with the job" is extraordinary. We have been given no explanation at all of why that should be done.
I think that if a body such as the NEB asks for an extra £300 million borrowing limit, we in the House of Commons are entitled to look with a rather cool eye at what the Board has been doing over the last few years. It is not a cheap Board, with half a dozen people, a man and a dog and a girl secretary. It is a rather extravagant organisation. It has cost £1·7 million this year simply to run and administer. It has pleasant offices in Grosvenor Gardens. They are all beautifully done up. The Board cost £1·4 million in the first year, and £1·7 million in the second year. What will it cost next year? We should be neglectful if we did not look at what it was doing.
We have discussed what it has been trying to do for British Leyland. Earlier I tried to ask the Secretary of State what the Board had done for Rolls-Royce, but he did not answer my question. He simply said that those concerned all got on rather well together. The NEB gave the Rolls-Royce board advice and gave nice lunches and that sort of thing. It probably even gave dinners in the evening. The NEB then came along and discussed matters with the Government, and there was a marvellous three-tier system. It is the most wonderful jobs-for-the-boys outfit that one has ever seen in all one's life. It is all quite extraordinary. The right hon. Gentleman did not actually say what the NEB had done for Rolls-Royce.
I thought the right hon. Gentleman might have said that the NEB got the order for the RB211 engine for Pan Am, but he would not. Apparently, it was Sir Kenneth Keith who got that order. If Sir Kenneth Keith is able to get orders of that sort with his assistants, why do we want the NEB? Why do we need Grosvenor—Gardens—this wonderful


address? What has the NEB done? What has it done for British Leyland as the other star in this debate?
If one looks at the number of reports from the NEB on Leyland over the last few months to try to see what it has done to help British Leyland, one sees that the Board has done nothing. I believe that the wrong decision for British Leyland would probably have been taken without the NEB and the right decisions would have been taken, if they are the right decisions now, and exactly the same applies to Rolls-Royce. The intervention of this extravagant bureaucratic layer between the company and the Government is absolutely unnecessary.
One has to see what else the NEB has been doing, because it cannot exist on giving lunches and dinners to Rolls-Royce and British Leyland. It has done one or two other things, and the Secretary of State did at least tell us that. It has gone into 39 different companies. Its productivity is not bad. If British Leyland's productivity was as good as that of the NEB in nationalising various things, British Leyland would not be doing badly. On 3rd April, in the trailer to the NEB's report, the Board reported that it was in 33 companies. Now it is apparently in 39 companies. I think that a better name for it would be the Nationalising Enterprise Board, rather than the National Enterprise Board, because that is just what it has been doing.
Let us look at the Barrow Hepburn deal, a very strange one. It was mentioned by the hon. Member for Colne Valley (Mr. Wainwright), and I shall come back to it in a moment. The Board took over the tanning interests of the Barrow Hepburn group, all of which were losing money and which were a total disaster area. The Board paid about £11 million into Barrow Hepburn for taking over these interests, many of which should have been closed down.
When the hon. Gentleman says that these difficult decisions could be taken—I think he said this—only within a public sector corporation, I find that impossible to understand, because what he is saying, if one reduces it ad absurdum, is that if there are too many corner sweetshops in a certain part of London not making money the situation can be

improved only if the NEB or some other body buys up two or three sweetshops and pays them to go into retirement. It cannot be done by the market, according to the hon. Member for Colne Valley This is the most ludicrous situation and he should know—and if he does not I shall tell him now—that within the tanning industry there was already a natural contraction of excess capacity.
What happened was that the NEB kept open many of these tanneries for longer than they should have been—for about a year—and even now this one has been forced to close down. But in doing this the Board got into some pretty odd company, because if we are to analyse what the NEB has been up to over these years I think we should see what happened with Barrow Hepburn.
There was a quote a few weeks ago of serious irregularities of the Barrow Hepburn group among some of its subsidiaries. The Daily Express said on 23rd March:
One result of the discovery is that the proposed dividend 2·299p a share is being deferred. The news is sufficient to lop 12p off the Barrow Hepburn shares.
The writer says:
This is an embarrassing blow to the NEB's investment reputation. Only a month ago it bought a million shares in Barrow and Hepburn at 45p each.
So there is already a paper loss of £110,000 and a possible loss of dividends totalling another £23,000. That is one of the commanding heights to which the NEB has been reaching out.
Let us look at the United Medical Enterprises. This organisation was backed by two City banks, which were not prepared, probably rightly, to put any more money into it. The NEB did so. Strangely enough, the United Medical Enterprises owns the British Nursing Association, the biggest supplier of nurses in the country, and a very successful organisation. It is an extraordinary thing for the NEB to go into. We do not know quite what will happen to it.
The NEB went into Twaites and Reed, a massive company at St. Leonard's on Sea with 12 employees altogether. That was highly unsuccessful. It lost £300,000 when it was taken over, and is still, I believe, losing large sums of money. Nobody else in the clock-making business wanted this company. Why


should the NEB be landed with it? It seemed quite extraordinary.
Fairey Marine, building £80,000 gin palaces in Cowes and Fairey Marine marinas and so on, was taken oyer. That was quite unnecessary, because there was a perfectly good offer for the Fairey group through the receiver from Trafalgar House, but the NEB, through ambition or something else, came along and gobbled it up over the head of Trafalgar House.
We had another loss—Hivent Ltd., in Washington New Town on the Tyne and Wear, into which the NEB put £54,000 some few weeks ago. That company has already gone bust. This is the sort of thing that the NEB is doing and it is costing £7 million a year.
I want always to be fair. Having been moderately critical of the NEB's activities so far, let me say this in its defence. There is a theory called the gap theory, which sounds like an army manoeuvre from the First World War. The investment gap theory is that only the NEB can go into certain areas because the market will not respond to them. My right hon. Friend the Member for Leeds, North-East referred to this in his speech. However, there is no hard evidence. We cannot prove that there is no gap occasionally in the investment scene. But equally I do not believe that the NEB has succeeded in proving that there is anything much of a gap.
I rest on two pieces of evidence. One is that the Treasury in its evidence to the Wilson Committee talked about this gap theory and the fact that there were certain areas of investment in which the City and financial institutions were not playing their proper part, but came to no conclusion and left it to the NEB. The big five joint stock banks also said that there was no real evidence.
There is a plurality of financial institutions throughout the country from the banks of the FFI and all sorts of other bodies with plenty of money for successful ventures, for ventures that are likely to go well.
I believe that the parliamentary control of the NEB is highly unsatisfactory. During 1977, while the NEB had been spending all this money, Parliament, through the PAC, spent six hours studying the NEB. I do not blame the Public

Accounts Committee because it has the whole area of public expenditure to look at. Only six hours was spent during the whole of that year in studying the NEB.
I believe that until we come into power again, while the NEB is still in being, there is a strong case for having a special Sub-Committee of the PAC that can permanently monitor and keep an eye on what the NEB is doing.
I would like to raise, too, the question why the Comptroller and Auditor General is not allowed in to look at the NEB's books. He goes into every other area, but by some strange quirk he does not go into this. The PAC has commented on this. I hope that something can be done about it.

Mr. LesHuckfield: Talking about parliamentary accountability, may I remind the hon. Gentleman of the occasion when we had a whole day's debate in this place about the NEB when the hon. Gentleman failed to turn up? May I also press him to the logical conclusion of what he is saying? He has been going through all the industries and the things in which he thinks the NEB need not be involved. Is he saying that he would like to do away with the NEB?

Mr. Grylls: The hon. Gentleman must not anticipate me, but I shall not keep him hanging on the end of a string for more than a few minutes longer. I shall be as quick as I can. I intend to deal with that perfectly openly.
The Minister knows that this one-day debate was arranged at very short notice on a Friday. I had commitments in my own constituency on that Friday, but—and this was commented on at the time—having debates in Private Members' time on a Friday morning or afternoon is not the way to deal with massive sums of public expenditure. The Minister knows that perfectly well. It was not a very successful intervention.
I hope that when the Minister of State winds up the debate he will tell us what is to happen to the dividend on the public dividend capital of £120 million sunk into the NEB at present. When will there be a dividend on that? It is a very strange body that does not pay a dividend on the money in it already and then asks for another £300 million of taxpayers' money and does not even apologise for


not paying a dividend or explain why. It certainly does not say whether it will pay a dividend in future. I do not know whether the Minister of State has any information for us. I hope that he will be able to include that in his speech.
The Liberal Party's role in this matter is very odd. Only the other day the Liberal Party was doing a review of the first year of the Lib-Lab pact and said that during this year one of the benefits that it had brought was that there had been no more nationalisation. It said that 12 months had passed without any nationalisation. No nationalisation my foot!
Twenty-two companies—nearly two a month—were taken into the NEB during the last year. Now it is asking for another £300 million. How many more companies will it take in during 1978? What has the Liberal Party been doing about it?
I warned the hon. Member for Colne Valley that I would say this, but I believe he has had to go. I believe that the Liberal Party should say why in a pusillanimous way it is allowing this creeping nationalisation through the NEB to go on week after week when nobody appears to notice it.
I can only assume that the Liberals agree with the Prime Minister when he says that nationalisation is never off the agenda. It certainly appears to be very firmly on the agenda at present. Let me make my position quite clear. I want nothing more to do with it, nor does the taxpayer. The taxpayer understands the problems of Leyland and of Rolls-Royce. I do not believe that the hard-pressed taxpayers could understand, if they knew—as perhaps they will know as a result of this debate—why their money is being frittered away in many useless companies, or if the companies are not useless they are companies which could well remain within the private sector, which shows no need for the NEB to come along.
I believe that we were quite right, as the Opposition, to say in "The Right Approach" that we would abolish the NEB. I believe that we were quite right to say in the campaign guide that we would abolish the NEB and stop it going on its expensive shopping spree around British industry. The NEB is an instrument of nationalisation. When the Conservative

Party comes into power. I believe that it will be stopped in its tracks.
As for the NEB's self-appointed role of looking after a number of lame ducks, if one examines which we do not have time to do in such a debate—what is done for any of these lame ducks in the National Enterprise Board's stable we see that it has totally failed even to justify that role Therefore, it will be absolutely right for one of the first actions of a Conservative Government to be to tell the NEB to stop spending money in this way, to take over no more companies, and as soon as it can to return those companies that it holds today to the market whence they came. The remaining difficult ones may have to remain for a time within the Department of Industry, operating under the constraints of the 1972 Conservative Industry Act, which gave any Government all the power they needed to do a rescue operation if in the last resort that had to be.
There is no need for this expensive body. I hope that as soon as possible it will be put to sleep.

8.29 p.m.

Mr. Ian Lloyd: I think that it is a long time since the House heard any comments of that great veteran President of the United States, President Truman, who I think will go down in history if only for one saying—"The buck stops here." I could not help thinking, as we debate the subject of British Leyland, that wherever the buck was stopping it was not here. In fact, it was moving around almost at the speed of one of those little solid black objects that ice hockey players use. It is moving so fast that we can hardly define where the responsibility stops.
We have heard a great deal this evening about confidence. The word has been shifted around the House. I think that the hon. Member for Coventry, North-West (Mr. Robinson) criticised my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) for showing insufficient confidence in British Leyland. The National Enterprise Board has a remarkable statement on page 7 of its report:
Both British Leyland and the NEB believe that lack of confidence, engendered to a substantial measure by the public attention to the company's problems, has been a very large


factor in the recent decline. The company's weaknesses have been exaggerated and its strengths largely ignored.
That seems to me a rather strange statement, because if anything it is passing the buck of confidence to the public and laying British Leyland's position to a substantial degree on lack of public confidence.
But is that really the case? Is it the public confidence that has caused the present situation, or is the lack of public confidence a consequence of the complex state of affairs that the public now understand by the term "British Leyland"? Is it in fact the result of a lack of public confidence in the general management, the manning procedures, the productivity, the situation which has developed at Speke, which most people in my constituency, whenever we have discussed it, have found astonishing? Is not this lack of confidence a direct result of decisions taken not only by the board of British Leyland but by the British Leyland work force—from the board right down to the bottom of the worker hierarchy?
The report said that some disputes in the company had been outside the company's control and some of them within the company's control. I wonder what precisely the NEB meant by disputes outside the company's control. It is a vast company, employing tens of thousands of people. The astonishing figures for strike performance last year are as follows: 14 million man-hours were lost in the whole of 1977; 192,000 vehicles were lost in the same period.
If we do some simple sums, taking with overheads the average engineering man-hour at £5 an hour, we find that we are talking of vast sums of money—about £70 million. The cheapest vehicle that British Leyland makes is the Mini, at £2,000. A total of 192,000 vehicles at that lowest figure means that one is talking about vast sums—hundreds of millions of pounds. Yet the report asks us to blame the British public for a lack of confidence in British Leyland. It seems to me that it has stood the whole matter on its head. If they have no confidence in this organisation, the British public certainty had a great deal of evidence and many unfortunate situations on which to base that lack of confidence.
One Labour Member suggested that we should turn to the example of France and Renault. I have heard this argument put elsewhere, not least in British Leyland. We were told that because Renault now employs 70,000 people more and has over a period of about 25 years produced £44 million of profit, this is an answer and that the French Government's attitude to Renault is an example that should be followed by the British Government in relation to British Leyland.
I do not believe that that follows at all. The answer for France and Britain is exactly the same. It is to be found in the form of a question: what return would the nation have achieved from an investment of these sums in all the alternative possibilities of capital investment across the whole spectrum of industrial investment in France or the United Kingdom? The answer is that we do not know, simply because those questions are very seldom asked, and one is always asked to assume that the investment takes place and there will therefore be beneficial consequences, or it does not and there will be disaster.
The hon. Gentleman turned then to the subject of labour relations and suggested that we should not endeavour to achieve beneficial results in British Leyland by—I think that this was his phrase—threats and whip cracking. But how can British Leyland be extracted from the situation in which it finds itself? The NEB report has been modestly frank on the question of the world market. In my view, it certainly cannot be extracted by threats and whip cracking. It can be extracted only by a general and voluntary understanding throughout the organisation of the nature of the challenge confronting it.
One of the surprising features of the NEB document is that, although it gives the productivity increases in vehicles per man-hour which the National Enterprise Board hopes British Leyland will achieve, nowhere does it set out the appalling comparisons between productivity per man-hour in British Leyland and in Ford for instance, to go no further than the confines of the United Kingdom. Certainly, when one crosses the Channel or turns to what is happening in the United States or Japan, one sees productivity figures which leave no room either for


threats or whip cracking or for any overconfidence on the part of Mr. Michael Edwardes—who, I am sure, does not have it—or anyone else throughout the British Leyland work force.
It was my good fortune some months ago to visit the Datsun plant in Tokyo, and I saw there the completely automated production line, using Kawasaki units, with completely automated welding units operated by microprocessors, and hardly a man in sight. When I asked the individual who was showing us round whether he and his colleagues believed that they achieved the same productivity levels as were achieved in Detroit, he laughed and said "We are well beyond the productivity levels of Detroit." Moreover, not only is Datsun beyond those levels but it is increasing its rate of productivity at about 10 per cent. or 15 per cent. per annum.
One hon. Member on the Government Benches said earlier that we were in a moving situation. He was perfectly right. But why have the Japanese, with the rising value of their yen, nevertheless managed to continue to increase their balance of trade positively and managed to continue to export? The answer is that the productivity represented by the yen, however much more expensive it may be to buy, continues to rise. I believe that the same situation prevails in the West German motor car industry.
That is what our employees, our managers, our shop stewards and our trade union leaders are up against. When will they realise it?
I turn now to the question of monitoring. Naturally, the House is reluctant, if I may so put it, to breathe down Mr. Edwardes' neck. We feel that that would be a mistake, and we go back to all the philosophy which lay behind the original nationalisation Acts, when we said that once we had nationalised an industry we should leave it to management to get on with the job. So we ask ourselves these questions. Who monitors this organisation? Who monitors British Leyland? Why do we monitor? How often do we monitor?
I believe that if British Leyland is to join the vast non-monitored sector of public capital investment in this country, we shall be heading for a disaster. Private

capital inevitably involves—it must involve—private monitoring, but that is no guarantee of its success. Public capital must involve public monitoring, and that is no guarantee of its success. But if there is no monitoring in either case, it seems to me we are entering a strange situation. At least for private capital the individual who chooses not to monitor is risking only his own resources, but in the case of public capital it is not open to the individuals who make the resources available to decide to monitor or not to monitor. We have to do it for them.
In this situation, in my view, there is no real equity capital but there is a grey sector which lies unhappily and inefficiently between the two. Monitoring is a function of scale. It is probably not necessary for £1,000, and it may not be necessary in certain cases even for £100,000, but when one is talking about £1,000 million of public money, realising that that money is found virtually entirely by the taxpayer or, if not by the taxpayer, it is borrowed on his behalf and has to be financed by him, it seems to me that for any hon. Member to argue that we should not monitor—and continuously monitor—the performance of British Leyland is to argue on a very strange basis. The public investor can do nothing about it.
Why do I argue thus? What are the sums? We are talking about £1,000 million of investors' money. There are 20 million taxpayers in this country. That is £50 per taxpayer if every taxpayer makes his contribution. If we were to speak simply of taxpayers with spare resources—the report of the Inland Revenue would give us the sort of figure which we should choose—we are talking about 2 million taxpayers, so that is £500 per taxpayer with investable resources. If only half of those were to make a different judgment and say that British Leyland was not for them, we should be talking about £1,000 per taxpayer able and willing to invest in British Leyland.
That is for the total sum. If we are talking only about the sum being asked for next year, the £450 million, we are talking about £22·50 per taxpayer, or £450 per taxpayer able and willing to make such an investment. That does not permit of a non-monitoring situation. It does not permit of the NEB talking, as it has done here, of the desirability of letting


British Leyland get on with the job and then looking at it once a year to see what has happened before deciding whether to give more money and to come back to Parliament.
No major public company in the private sector could possibly expect to get away with a degree of non-surveillance similar to that which the NEB now asks for British Leyland. One has only to cross the Atlantic to see the situation which exists in the United States where major public companies such as du Pont and General Motors and all the major motor car companies are reviewed quarterly and publish quarterly profit and loss accounts, which are very closely monitored by the whole of the investing system in the United States and elsewhere. I see no reason whatsoever why the imposition of such a requirement on British Leyland should in any way inhibit its capacity to recover and to equal the performance which it has to equal, that is, of its major competitors.
I now refer to the question of equity capital. This is one of the major misdescriptions of the year, because nothing that is being supplied to British Leyland by the NEB is equity capital. Equity capital involves a voluntary decision by the individual or the institution to make funds available. There is nothing voluntary about this. It is a compulsory levy on the taxpayer. We are told, therefore, that the British Leyland board must have—page 12 of the report—"an assured level of funds". It must be assured, and if it has that assured level, then, of course, it can succeed. Every firm in the world, given an assured level of capital on this sort of basis, could succeed. There is no reason why it should not. It is very nice to have an assured level of funds virtually guaranteeing thousands of pounds of capital for investment or for any other purpose, and the purpose is comparatively ill-defined in the report.
Let us, then, ask these questions. Because the market could not obtain the type of guarantee which it would require before it would begin to contemplate putting forward £100 million, never mind £1,000 million, it has not come forward. What are these guarantees? They are that the funds would be invested in productive equipment. There is very little to suggest, other than statements in the report, that it is to be invested in productive equipment.

We are simply given global sums. We could ask for a guarantee that the rewards which British Leyland employees award themselves—and we have heard a great deal about this in recent months—should bear some intelligent relationship to the general overall economics of the company's performance.
Whatever the company did in Speke it bore no such relationship to the position in which that unit of British Leyland found itself. When the people there discovered that the car was not selling and that there was a waiting list for the vehicle in some places where its reputation still survived, did they say "Let us get down to it and make sure that the production line is reformed and that the vehicle is meeting the standards expected of a sports car"? No, they went on strike for two months, and on this basis the public is supposed to have confidence in British Leyland. I find it absolutely astonishing.
We should ask for the guarantee that there should be some return paid on the capital invested. I do not think that there is any guarantee in that document, or in any of the situations which we have been asked to discuss this evening, that there will be a return on the capital of any kind.
I ask the Minister: would the staff and directors of the NEB invest their personal funds in this new, revised British Leyland? Would the Secretary of State put up £10,000 of his own money in British Leyland? Would the directors of British Leyland put up some of their own personal funds in the new British Leyland? Would members of the Tribune group put some of their own money into British Leyland? Would trade union pension funds be prepared to put their money into British Leyland? The answer in every case is clearly "No". Yet the Government have the effrontery, despite all that, to say on behalf of the great British pub-tic. "We are going to put £1,000 million of your money into British Leyland—heigh-ho", when we know that by every test of the market, other than employment maintenance, it is a false prospectus.
If that is the test of confidence, I find it astonishing that we should be asked to make an investment on the basis of such a statement. Page 5 of the NEB report says:
It is the hope of the management that the new organisation structure and the creation of


new management teams will also contribute positively".
That is the hope. But no firm would go to the market on the basis of such a hope. On page 8 we are told in the context of the productivity crisis—and crisis it is throughout our motor car industry—that British Leyland
has … adopted a cautious approach to the timing any extent of productivity improvements".
At this time, when the Japanese car makers are virtually striding through world markets and knocking us off one market after the other, British Leyland adopts a cautious approach. On this basis we are asked to vote £1,000 million and are told that the board of British Leyland understands the situation and that the NEB
is pleased to see that it is giving this aspect of its performance a very great deal of attention".
How nice of the NEB.
I would not put £1 of my own money, let alone £10,000 or my share of the £1,000 million of public money, into British Leyland on the basis of such a prospectus. But we are told on pages 10 and 11, in an astonishing statement, that
Cash provision in the form of equity is sought by the British Leyland Board in order to restore the strength of the balance sheet.
How extraordinary. The concept of risk-free capital is transformed to enable the British Leyland board to borrow from the market what it could not get from equity. In another astonishing statement in the report, we are told that the NEB
will want to receive a commercial return on its major investment in the company.
But we are given no indication of what that return is likely to be in any positive or reassuring way.
At the end of this analysis, the question, which I have not liked to ask the British Leyland board, as it offers its stock option scheme, is whether British Leyland itself would take it up, if ever. Would the workers and managers of British Leyland themselves, with their own money, back an arrangement of this kind? The answer is "No". Surely Parliament and the public are entitled to know which segments of the NEB are succeeding and which segments are failing. The market would close down the

failures. The Government will not close them down.
When the aircraft industry on the West Coast of the United States went through a critical period it was apparent that the Boeing aeroplane company was able to reduce its employment force by about 30,000 people in a short time. Some hon. Members would argue that that was a terrible thing. They would argue that it should not be allowed to happen in any circumstances. But the result was that the Boeing aeroplane company survived and recovered and is today without a doubt the world's strongest aircraft company, supplying about 93 per cent. of the civil airlines of the world.
Had there been an NEB in California at that time, what would have happened? Vast sums of public money would doubtless have been poured into Boeing and employment would have been kept at a very much higher level. All the incentives to reduce its work force and streamline its operations in order to place itself in a position from which it could recover would not have worked.
I come to the key question. Are we to improve the mobility of resources in the United Kingdom or are we not? If we go about it in this way, the answer is that we have no intention of improving the mobility of resources in the United Kingdom. If we fail to improve the mobility of industrial and economic resources in the United Kingdom, nothing that the Government can do will save us. As I see it, that is the essential argument which we have to consider tonight when we vote.
I may be asked for a specific example in the motor car industry where resources should now be invested. If one reads a small fraction of the energy papers that have been made available to hon. Members, the answer would be probably the development of electric propulsion vehicles. How much are we spending in that regard? Is it a matter of millions of pounds, or tens of thousands of pounds? It is certainly under £10 million. If we are talking in the order of putting up public money of £3 million or £4 million, I would suggest that in the energy situation in which we find ourselves this is the sort of area into which new investment should be going.
My conclusion is that no Government of either party can save British Leyland.


No Government of either party, by coming to the taxpayer for hundreds of millions of pounds, can save British Leyland for more than two or three years at the very outside. British Leyland's salvation depends on its own employees. The House of Commons and the taxpayers must be given much more convincing and persuasive evidence that the employees of British Leyland realise that their destiny lies in their own hands.
I believe that, regrettably, the evidence which has reached the taxpayer over the last two or three years, if not longer, going right back to the end of the war, is that this realisation just does not exist. If there is a challenge to the management of British Leyland it is to bring that realisation directly and wholly home to the employees of British Leyland. Then the firm might survive. Then there might be a recovery.
If that happens, I would suggest in all humility that the amount of public money involved would be nowhere near £1,000 million. It would be seed corn capital which would be required for much more limited areas and for a much more limited time. Those concerned, who had sought, obtained and made effective their own recovery, would cheerfully leave the situation at where the House of Commons, Ministers, Shadow Ministers, the National Enterprise Board and other organisations of that kind would be constantly breathing down their necks. The remedy for that deplorable state of affairs lies entirely in their own hands.

8.55 p.m.

Mr. Ioan Evans: Opening the debate my right hon. Friend the Secretary of State said that in its vote today the House would be directly influencing the livelihood of hundreds of thousands of the electorate and their families and that the total employment in companies in which the National Enterprise Board had a stake was more than 330,000. Listening to Opposition Members addressing the House, one would not think that that was the case.
In British Leyland we have a company which has been taken over and supported by the NEB, and of all the actions that this Goveriment have taken one of the most important has been the setting up of the NEB.
It is regrettable that the Opposition threaten the existence of the NEB. It is true that they have not been universal in their condemnation of it, because there seems to be some division about it. However, we know from "The Right Approach" that it is their intention to wind up the NEB, and it is important that the electorate should realise that that is the intention of the Conservative Party, bearing in mind especially that there are 13 principal subsidiaries, 17 associated companies and 330,000 people employed in British Leyland.
For a long time in this country we have experienced the problem of the failure of successive Governments to invest in manufacturing industry. When he was Prime Minister, the right hon. Member for Sidcup (Mr. Heath) spoke about the unacceptable face of capitalism. But, although he made appeal after appeal and although his Government made tax changes to try to attract investment into the private sector of industry, it was the Tory Government in their 13 years in office between 1951 and 1964 and again between 1970 and 1974 who failed to get investment. When they went into Opposition they became extremely doctrinaire, and we are told now that if ever they are returned to power they will embark upon a programme of denationalisation. However, when they have been in power they have not done so.
It must not be forgotten that the last Tory Government took Rolls-Royce into public ownership, with the support of the then Opposition. If market forces had been allowed to have their way the Rolls-Royce organisation—that tremendous name in British engineering—would have gone out of existence. Despite their dogma and doctrinaire theories, it was the Tory Government who took Rolls-Royce into public ownership, and of course their action has been justified. But if it had been a Labour Government who had taken over Rolls-Royce, the Conservatives would have been making the sort of speeches that they have made today about British Leyland.
The hon. Member for Havant and Waterloo (Mr. Lloyd) attacked British Leyland, despite its new management and despite a work force which is working well together. The motor agents are striving to persuade people in this country


and elsewhere to buy British Leyland. We have all received a document from the Society of Motor Manufacturers and Traders showing the 10 top sellers in Britain today, and British cars occupy nine of the top 10 places. In the top five we see the Leyland Mini, the Morris Marina and the Austin Allegro.
Cannot we persuade the Opposition to put aside their doctrinaire theories and pay tribute to British Leyland? Whereas in January it had only 21 per cent, of the market in Britain, in February it achieved 31 per cent. That represented a 10 per cent, increase in one month. If only the Opposition would stop knocking the NEB and British Leyland, we might be able to get matters into a better perspective.
The need in the country is to get more investment into manufacturing industry, and I believe that the way to achieve that is through the NEB. That is the method we should adopt. The Opposition do not complain when Ministers say that £1,700 million has been given to private enterprise. That is public expenditure. If the Opposition deplore public expenditure going into the public sector, I cannot understand why they do not deplore it going into the private sector as well.
A large number of companies in the private sector are benefiting because of the Government's action. Are we then to say that we should not put public money into the public sector? Is the right hon. Member for Leeds, North-East (Sir K. Joseph) nodding in agreement? No, it seems that the right hon. Gentleman is shaking his head. At least the Opposition Front Bench is not with the Opposition Back Benchers. There is £1,000 million being given to the manufacturing sector of the public sector. That is fully justified. Equally, in the present economic circumstances it is fully justified for £1,700 million to go into the private sector. However, in the years ahead the Government must think about using the NEB to a greater extent. We must have planning agreements with the private sector.
Opposition Members talk about the money that is going into the NEB and control of it. The fact remains that there is far more public control of money going into the private sector. I

hope that in future we shall not be talking only of channelling money into the NEB but channelling all the funds that go into the private sector.
The Conservative Party decided to maintain the name of Rolls-Royce. It put aside its doctrinal theories and took Rolls-Royce into public ownership. So, too, the Government have saved the names of Rover, Triumph, Austin, Jaguar and Morris. I believe that in the years ahead those names will play a major part in the export drive as well as supplying the home market.
I, too, believe that there are greater things to come from British Leyland. The company is exporting about £2½ million worth of its products every day. That is a major contribution to our national finances. It has rightly been said—the company has advertised the fact—that the benefit of British Leyland exports are equal to the benefits of North Sea oil. That should be said frequently in the Chamber. A great deal has been said about the benefits that we derive from North Sea oil, but the benefits from British Leyland exports are as great.
If the Conservative Front Bench is saying that if a Conservative Government were in power they would have allowed this major car-manufacturing industry to go out of business, it must remember that that is what would have happened to Rolls-Royce if the Conservative Government had not taken it over. Are Conservatives saying that they would have acted on their present theories and allowed British Leyland to go to the wall?
We must remember that there are about 7,000 companies supplying components to British Leyland. My right hon. Friend the Secretary of State talks about 330,000 employees in the NEB who would be affected, and mainly those in British Leyland. However, there are hundreds of thousands of employees outside British Leyland who would have been affected if the company had been allowed to go out of existence. My right hon. Friend is modest when he says that there are 90 Members of Parliament directly affected by the NEB. Surely there are many more hon. Members who are so affected. It is probable, for example, that I am not in the list of 90, but I would be affected if British Leyland were allowed to collapse.

Mr. Bruce George: As one of the 90, I reiterate that if British Leyland were allowed to collapse, Walsall would be decimated industrially. That is only one of the many arguments against such an event being allowed to take place. I totally applaud the Government's efforts to maintain this vital and viable industry.

Mr. Evans: I absolutely agree. However, my hon. Friend knows my locality as well as I do, and I must disagree with him if he confines his remarks to Walsall. When we talk of British Leyland, there are some who think that only the Midlands are involved. In my constituency there is a company in the private sector named Helliwelds, a partner in Tube Investments. It supplies exhaust tubes to British Leyland. I visited the company when there were changes taking place at British Leyland. I was told that if British Leyland collapsed, a large section of the work force of that private company would collapse with it. The probability is that if that company did not supply components to British Leyland it would not be a viable proposition for it to supply components to Vauxhalls, Fords, Chryslers or other motor manufacturers. If British Leyland had collapsed, it would have gone out of business.
Another firm in the private sector in my constituency that is in a similar position is A. B. Electronics. It supplies locks and electrical equipment to the car industry. Dunlop, for instance, supplies the foam filling for the seats. There is Cambrian Castings. I could go on.
I think that the Government are acting rightly. I hope that they will stand firm and expose the divisive attitude taken by the Opposition on this matter. I am sure that, if they were in power, they would not be so stupid as they pretend to be in discussion in the House of Commons. They are being doctrinaire because they want to show to the Conservative Party outside the House that they stand for something different. But, just as they were prepared to put the national interest first and to take Rolls-Royce into public ownership, so, too, at the end of the day I am convinced that they will realise that the National Enterprise Board has a real part to play in getting investment into manufacturing industry and that in the years ahead British Leyland will play an important part in the export drive

get this country out of its economic difficulties.

9.6 p.m.

Mr. Tim Renton: The hon. Member for Aberdare (Mr. Evans) trotted out the old saw about the failure of successive Governments to invest in manufacturing industry. How much better it would have been if he had talked about the failure of successive Governments to create the conditions in which investment in manufacturing industry can take place. The hon. Gentleman should look at West Germany, Japan and the United States to see the industrial investment which has taken place there over the last 20 years. It has been not because there have been National Enterprise Boards in those countries but because they have had low tax rates, the possibilities for companies to make large and growing profits, stable employment conditions and little changing intervention from Government. Those are the conditions which cause investment manufacturing industry to take place, not NEBs.
I should like to talk about the order relating to the NEB and to remind the House of what the chairman of the NEB said recently when giving oral evidence to the Wilson Committee. As reported in The Times of 15th March, he said that the National Enterprise Board was not clever enough to beat the whole of manufacturing industry.
I fear that the NEB, from its record over the last two years, is trying to do precisely that. We have heard during the course of the afternoon, not from the Secretary of State who was suspiciously quiet about specific investments made recently by the NEB, but from various hon. Members, that the NEB has in recent months gone into tanning, electronics, hydraulic tube and pipe bending, engineering and medical equipment. Recently it overbid Trafalgar for the purchase of the diversified Fairey Engineering Division. It appears to be setting itself up, despite these words from the chairman of the NEB, as a conglomerate without any industrial logic behind it whatsoever.
Every business man in recent years has learned that life in the business world is very complicated and that it is possible to make the right business or


investment decisions only when those involved in taking such decisions have some practical experience of what they are to invest in or to manufacture. This need for practical experience is certainly true of politicians. It is because many of us do not have it that we are such bad judges of industry. It is also true of business men themselves. It is particularly true of the NEB, because it is inevitable that, in its position, it is not offered the best investments. The triple-A companies which want to raise more money do not go to the NEB for it. They can get that money from the clearing banks, the merchant banks or the Stock Exchange. There is a host of places to which they can go for money.
The formation of this muddled conglomerate which the NEB appears to be becoming is such that the companies which go to it for help are inevitably those described by the chairman as
companies in the poverty trap.
Why are they in the poverty trap? It is because they have had a bad profit record. As a result of that bad profit record or failure to design good new products, good management has left them. They do not have strong management teams. Yet it is precisely these companies, drawn from an infinite range of activities, for which the NEB is now setting out to provide finance.
No one can say that the record of the NEB over the last two years has been successful. Hivent, one of the companies in which it invested, is already in liquidation. British Tanners was formed by the NEB. The NEB is being sued because the other tanning companies do not believe that it is possible for British Tanners to make a profit. In this they feel that the NEB is in contradiction to its statutory obligation to seek a reasonable financial return on its investments.
Cambridge Instruments, another investment which NEB inherited, has just reported an increased loss. The result is that in the abbreviated accounts that were made available last week we find that the subsidiaries of the NEB apart from its main investments lost £1·1 million in the last year and that its other associated companies lost £1·9 million. That is no great encouragement to the House when it is asked to provide another £300 million

for the NEB for the purpose of making other investments of this kind.
I hope that the Minister of State will now answer the question of mine that he failed to answer at Question Time today. What is the investment policy of the NEB? How, out of that policy, does he see any chance of the NEB reaching an overall return on its investment in the years ahead of 15 per cent, to 20 per cent.? That is the target that the chairman of the NEB set himself. I believe that this is a Herculean task for the chairman. For the reasons that I have mentioned, because so many of the companies are in financial difficulties, and because they are so widely spread over many diverse sectors, I do not believe that the NEB has a hope in hell of achieving this target.
I do not believe that the cleverest merchant bank or the best clearing bank in the world could achieve the return that has been set by the NEB chairman. In those circumstances I have no doubt that when we are asked in years to come to provide more money for the NEB, should this Socialist Government by any disaster still be in power, we shall be told that the expected rate of return has been substantially reduced once again.
My hon. Friend the Member for Surrey, North-West (Mr. Grylls) mentioned the degree to which the NEB is accountable to Parliament. The Chairman of the Public Accounts Committee has already expressed concern at this and at the fact that the Comptroller and Auditor General cannot look at the books of either British Leyland or Rolls-Royce, which are two of NEB's main subsidiaries. A further £850 million is now being requested by British Leyland. Once all that money is in British Leyland, £1,200 million will have been advanced by the taxpayer to British Leyland. Yet the House will have only a marginal degree of control over British Leyland. The National Enterprise Board falls between several Select Committees at present. There is no clear decision about which Select Committee is responsible for surveillance of the NEB.
I declare an interest in this respect. I hope that the House will agree that the NEB should be added to the remit of the Select Committee on Nationalised Industries. It is not within that Select Committee's remit at present. In the light of


the larger sums that will be given to it if the Government win the vote tonight, I am sure that it should be.
As my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) said, the preliminary figures submitted by the NEB last week were disgraceful. They were not the type of figures on which any private company would have dared to seek even £500,000. In those figures there are a number of discrepancies from the figures that were reported in the annual report and accounts last year. I hope that the Minister of State will enlighten the House on this matter. I shall mention just one of those discrepancies.
In the profit and loss account, which appears on the first page of the NEB figures, the NEB and its subsidiaries are reported to be earning 7·5 per cent, return on capital employed this year, compared with 9·6 per cent, return last year. Excluding British Leyland and Rolls-Royce, the figure for NEB and its subsidiaries, in place of 7·5 per cent., becomes 11·5 per cent. The comparison with last year is even then better, because we are told that last year the figure was only 7·3 per cent. On the last figure, therefore, a 7·3 per cent, return has risen to 11·5 per cent. The obvious conclusion is that the NEB is doing rather well.
However, when one looks back at the NEB's report and accounts of last year, one sees on page 20 that the return on capital employed last year is very different. According to these figures, the 7·3 per cent, is actually 14·7 per cent., and the 9·6 per cent, of NEB and all its subsidiaries was 11·8 per cent, last year. On the first one of these I mentioned, the figure now quoted for 1976 is half the figure quoted in the NEB's annual report and accounts. The only explanation that there can be is that the NEB has decided to change the basis of its accounting. That is not generally considered a very prudent practice. If the change has taken place, at least the Government should have made it abundantly plain to us in the preliminary accounts that were made available last week.
In summary, I have no doubt that the Secretary of State has sought to throw dust in the eyes of the House of Commons. By concentrating upon British Leyland and technically linking the British Leyland motion with the order increasing

the capital available to the NEB, he has sought to avoid a full discussion of the role of the NEB, or to imply that if we voted against the extension of capital for the NEB, we should be voting against further funds for British Leyland.
My right hon. Friend the Member for Leeds, North-East made that ruse abundantly obvious. The £300 million on which we are asked to vote tonight is for the NEB's pursuit of its own empire building. There is nothing necessarily in that sum for Leyland. We have been told nothing about new jobs being created in companies in which the NEB has invested. No justification has been advanced to show that the NEB in its new investments is doing a job that could not be done better, with no addition to staff, by other providers of risk capital.
It is no coincidence, perhaps, that "NEB" spells "Ben" in reverse. When one looks at that other great creation of the Secretary of State for Energy, the British National Oil Corporation, one must inevitably agree with the gentleman from Chevron who said that there was nothing that the BNOC was doing for the oil industry of this country that could not have been done more cheaply and more quickly for the State without the BNOC. Exactly the same is true of the NEB. Like the other madcap schemes of the Secretary of State for Energy, the NEB will end up by costing the taxpayer a great deal of money without creating any new jobs in manufacturing industry.

9.19 p.m.

Mr. Stan Thorne: As Opposition Members have had 81 of the last 92 minutes in this debate and as the Opposition Front-Bench spokesman wishes to begin his speech at 20 minutes past nine and it is now 19 minutes past nine, it would obviously be beneficial if I said nothing at all.

9.19 p.m.

Mr. James Prior: I should hate the hon. Member for Preston, South (Mr. Thorne) to feel that I was trying to keep him out of the debate. Actually, the debate does not have to end at 10 o'clock. If the hon. Gentleman had wished to make a few comments, although the House would not want to be long delayed, I am certain that it would have been very ready to listen to him for a


little while. Therefore, I am quite prepared to give way to the hon. Member now, if that is in order, for him to make a few comments.

Mr. Speaker: Order. Everything happens in this place. The hon. Member for Preston, South (Mr. Thorne) obviously does not want only a few minutes.

Mr. Prior: In view of that, Mr. Speaker, I shall continue with my speech.
We have had a much quieter debate than one might have expected from some of the remarks over the past few days. It is a pity that, on such an important matter as we have been discussing, more hon. Members have not been present.
When my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) was speaking, I sensed a certain disappointment on the Government Benches. They were hoping that he would provide them with some ammunition that they could use, as they have been trying desperately to use it in the last few weeks, in constituencies like Oxford and those in the West Midlands. My right hon. Friend supplied them with no ammunition of any sort. I could go further and say that I agreed with almost every word he spoke—which is almost a record for this Parliament. My right hon. Friend made a very good opening speech and the efforts by Labour Members to put words into his mouth were not successful.
My hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) summed up matters very well when he said that we were dealing not only with a great British industry but with British Leyland and that any company bearing the name "British" is of exceptional concern to all of us. With the implications for employment that this company has, the issue has a special importance for everyone in the House. Incidentally, I have seen no Minister from the Department of Employment in the Chamber all day. That is something which should be noted. It is because of the implications for employment that I have been asked to reply. Those implications concern not just British Leyland, not just those who might be dependent on it, but, according to them, the car component companies in Britain, too. They would be in a serious position if anything happened to British Leyland. So we

have to have regard to the whole car industry, particularly the car component industry.
The hon. Member for Coventry, North-West (Mr. Robinson) made a passing reference to the Ryder plan when he said that we had been going down the wrong track for two and a half years. He was right, but that was the Ryder plan. We voted against the plan and against the Financial Resolution. Everything that has happened in the two and a half years since justifies our decision.
I have been worried during the debate that there is a feeling in the House that the new plan published by the National Enterprise Board and put forward by Mr. Michael Edwardes in some very able speeches means that all our problems are behind us. That would be a false sense of optimism. We should certainly view the future with some fears and worries, although we must give British Leyland all possible confidence.
We should not underestimate the many people who have in the past few years become thoroughly disillusioned with the motor industry. Constituents in my area and elsewhere ask, "Why should we work hard and do our stuff for our family and our country when some people are prepared to go on strike at the drop of a hat, when management perhaps is not all that it should be? We are asked to bail them out time after time." That is the attitude that a great number of people in Britain are adopting and have adopted. We should take that into account and should not be frightened of saying so in the House, although at the end of the day our views may be very different from that.
My right hon. Friend the Member for Worcester (Mr. Walker), in an excellent speech, stressed the importance of continuity. Continuity as between changes in Government and between what we say now and what we may have to say in a year or two years' time is vital if we are to give to management, unions and employees in this and many other industries the confidence which is necessary. Hon. Members on both sides must accept that, if we are to get the investment which is needed in British industry, we shall have to develop over the next few years a degree of continuity and bipartisanship on matters of industrial policy which we have not had up till now.
That may be difficult to secure, but we must aim to secure it, because the lifetime of one Government—four or five years, however long it may be, with all the worries about when an election may take place—is not sufficiently long for an industry which must plan its investment much further ahead. Five years is the minimum time for investment to be approved by the board room and to take effect. In many industries, such as the coal industry, the period may be 10 or 15 years.

Mr. Ogden: Is the right hon. Gentleman saying that, if the Secretary of State and the management of British Leyland and the unions involved—either through the National Enterprise Board or without it—are able to decide upon an agreed programme of investment, and if that plan can be approved by the Opposition, they will guarantee the investment?

Mr. Prior: I hope to come to that later in my speech. If I have not answered the question by the time I sit down, I hope that the hon. Gentleman will rise again.
I believe that the tough approach of the newly constituted British Leyland board is an excellent augury for the future. I go so far as to congratulate the Secretary of State and the Minister of State on adopting so many of the good standards of private enterprise in selecting people to sit on their boards, in paying some regard to the selection of companies, and in the help which they are prepared to give to various industries.
I think that the right hon. Gentleman is doing a good job now in many respects. I hope that that will help him as much as the praise that the Opposition lavish on me sometimes helps me. Who would have thought three or four years ago that the Minister of State would be adopting this tough and realistic approach to the problems of private enterprise and State enterprise? Stories are leaked from the Department of Industry to the effect that, although the Secretary of State is tough, his toughness is nothing compared with that of the Minister of State who stands behind the Secretary of State to ensure that he takes the right decisions. I admire the Minister of State for it. Long may he continue to do so.
Mr. Edwardes has said that he regards the placing of further money in British Leyland as very much an act of faith.

That is the basis on which the House must agree to the £150 million which it is being asked to vote tonight. I hope that this will be faith backed by solid progress, because it is the duty of the House to have regard all the time to the way in which taxpayers' money is spent.
My hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) drew attention to the need for new models. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) talked about the over-production of cars and the need for further European integration. To that can be added the fact that there will have to be new outlets for the traditional skills as perhaps the passenger car side becomes—or, perhaps, remains—less profitable as time passes.
My hon. Friend the Member for City of London and Westminster, South raised some ominous points in what I thought was an excellent speech. He, with his experience, pointed out the commercial embarrassment of trying to carry out a corporate plan in public, and that really the plan put forward by the NEB on the subject of British Leyland concealed more than it revealed. We in this House are asked to pass judgment blindly on facts that we cannot be permitted to see. It is asking a great deal of this House to be put in that sort of position.
My hon. Friend the Member for Havant and Waterloo (Mr. Lloyd) pointed out that public monitoring is unsatisfactory, but what else can be done in these circumstances? He asked for quarterly accounting reports, and I believe that in this situation such reports would be entirely justified.
Having listened to my hon. Friend the Member for City of London and Westminster, South, and having heard a good many views outside the House, I think that we have to look at the position very soberly indeed. We have supported British Leyland. We shall do so tonight, and let there be no doubt about our support. It is not blind, unswerving support, but it is support of management and the labour force to give them the confidence that they need to get on with the job. My right hon. Friend the Member for Worcester pointed out that we shall not get good management unless we can show some continuity, and that continuity must be forthcoming if the management is to be recruited.
The same applies for distributors and customers overseas. They have to know that the change of Government that they and all of us expect will not lead to a change in British Leyland's future, provided that British Leyland achieves the targets that it has set itself and that we in this House and the National Enterprise Board approve. I think that it is immensely important for the country and for people in export markets to realise that there will be continuity and a future for British Leyland that goes beyond the lifetime of this Government. It is of some significance that the real question that is being asked is not what the present Government are doing about British Leyland but what the next Government will do about the company.
What has to be done if this confidence is to be provided? First, we have to get productivity up. But productivity in itself is not enough, because it will be no use producing more cars of a type, quality and styling that we cannot sell. Therefore, we have to get the investment into the new models, and we have to make certain that that investment is used efficiently.
The great difference between this country and almost any other country is that in recent years we have simply not kept our production lines going. I should like to quote from a note that I was sent on British Leyland. It says:
Productivity needs to be substantially increased. A report prepared by a sub-committee of the Cars Council appears to suggest that even after making allowance for different levels of investment productivity compares badly with British Leyland's European competitors (productivity of between 45 per cent, to 65 per cent, of European levels).
We all know that European levels come nowhere near Japanese levels, let alone what the South Koreans and other countries will do in the next few years. The great difference, as I see it, has been the inability over the past few years to keep production lines running the whole time. I might return to that in a minute.
Having dealt with productivity and investment, which I think are the keys to the future, I come to the whole problem of industrial relations. Whether we blame unions or management, whomever we blame, the outcome of industrial relations at British Leyland over the past few years has been absolutely shocking. I would

say, particularly to Labour Members and particularly to the hon. Member for Liverpool, Garston (Mr. Loyden) that I believe that hon. Members have a part to play in bringing about an improvement in industrial relations. That is particularly true perhaps on Merseyside. I believe that the remarks of the hon. Member for Garston, however strongly he may feel about the Speke No. 2 works, will do nothing to help industrial relations in British Leyland.
Although it is a tough and hard policy to close down any factory and reduce the number of people employed, we are now concerned about trying to save the jobs of literally hundreds of thousands of people who will lose jobs if we do not get this company right again.
Labour Members, with the influence that they can bring to bear on the problems of the trade unions and the problems of industrial relations, have a very important and responsible part to play. I do not believe that over the last few years they have done anything like enough to try to control the activities of the extremists in these factories, who are still and have always been a very small proportion of the total work force.

Mr. Loyden: Is the right hon. Gentleman aware that the point raised this afternoon was not only in relation to Leyland, although obviously that played a major part in my motivation, but concerned the whole effect that this decision has had, in my view, upon Merseyside? If at this stage workers on Merseyside are seeing a cut-back in capacity of one of the major car-producing industries in the country, followed by cut-backs in private enterprise, there ought to be little surprise when that is met with the hostility with which it is being met at the moment on Merseyside.

Mr. Prior: The hon. Gentleman has once more got his timing wrong. We have had a number of problems in the past few years on Merseyside, and the problem with Speke is a culmination of the troubles. It is no good one saying that because of the problem of Speke there may be more trouble in private enterprise. If Labour Members of Parliament in the Merseyside area had been more careful in trying to promote good industrial relations, I believe that there


would be a much better position there now than there is.

Mr. Eric S. Heffer: Does the right hon. Gentleman know that he is, as usual, talking absolute and utter rubbish? [HON. MEMBERS: "Oh."] I shall repeat it. The right hon. Gentleman is talking absolute and utter rubbish. Over the years Labour Members from Merseyside have played a positive role in industrial relations on Merseyside. They have played a much more positive role than Conservative Members have ever played or will play, first, because the Conservatives know nothing about it. The right hon. Gentleman has talked about industrial relations on Merseyside. We have not had a strike, for example, in the docks for four years. We have hardly had a strike in 99 per cent, of industry on Merseyside. The right hon. Gentleman should be ashamed of the statement that he has made today.

Mr. Prior: That is the sort of reaction from the hon. Gentleman which is entirely predictable. If he had heard his hon. Friend the Member for Garston, he would have better understood what I meant. Perhaps he will read his hon. Friend's speech tomorrow morning and see exactly why I made those remarks. [An HON. MEMBER: "Will it be printed?"] He probably will not read it tomorrow morning, but I should like him to read it because I am as concerned as he is about the state of employment on Merseyside and I want to see it put right, but statements such as those made by his hon. Friend in the Chamber today do nothing whatever to help. There is a great deal which could be done to help, because there is some jolly good labour on Merseyside, as I know as well as the hon. Gentleman himself does.
I believe also that the more we can have a self-imposed silence on the industrial relations problems of British Leyland, the more likely will it be that we shall get some sense into the situation. I must say that my heart sank when I heard on the news on Friday night that the new pay scheme had been turned down. I do not believe that the new pay scheme is of vital consequence to the future productivity or production of British Leyland, but once more the impression was given by the media that this was a great defeat for management. I believe that

that is a totally false impression to have given, and I greatly hope that the media will now leave British Leyland alone to get on with its job.

Mr. Heffer: That goes for the Opposition, too.

Mr. Prior: Also, if I may say so, I believe that what we have to seek is not a scheme which is piece-work and not a scheme which is measured day-work. I think that one trade union official said that we had to let the donkey see the carrot, and I believe that that is right if we are to have some success in British Leyland's industrial relations.
I endorse what was said by my right hon. Friend the Member for Worcester. I believe that a share ownership scheme for the employees of British Leyland could have a beneficial effect on their attitudes towards greater productivity.
I turn briefly to the Opposition attitude to the National Enterprise Board. I can put it quite simply. We believe that there is a case for some form of casualty clearing station—a board which deals with companies which for the time being run into trouble but which, once they are restored to health, should be restored again to private enterprise. None of us on this side believes that there is a place for a National Enterprise Board which is seeking to invest in profitable British industry.
That is amply borne out by some comments in the Financial Times on Friday in an article by Mr. Anthony Moreton who discussed the attitude of the National Enterprise Board. In that article he quoted some words of members of the NEB in the regions, and one of them was a comment by Mr. Gerald Connolly, the NEB's North-East director, to this effect:
Many companies are not so much a pressure vessel for generating profits as a colander. We are looking for the former.
It is not the job of the National Enterprise Board, with taxpayers' money, to be seeking to invest in successful industry. Nor do I believe that at the moment there is any difficulty in finding private resources in place of the NEB's resources. In this connection I quote from the same article in the Financial Times the words of Mr. Arthur Ward of the NEB:
This is why we have had such difficulty in finding a home for our resources.


At present the National Enterprise Board has a home for its resources. That home is British Leyland and Rolls-Royce.
I understand the attitude and the zeal of those who work in the NEB to try to enlarge their scope of operations, and I have a high regard for Sir Leslie Murphy, who, I think, is doing a first-class job as a public servant trying to interpret the wishes of Parliament. All I am telling him is that the wishes of Parliament will be changed with regard to his role in the not too distant future.
It is not the duty of the National Enterprise Board to support every lame duck, as the hon. Member for Garston seemed to suggest it was. In so far as firms are profitable, they have no need for cash. In so far as they are not profitable, the NEB and the Government have to decide whether they should be supported. But each time cash is invested there is less for private enterprise, more has to be paid by the taxpayer, and, of course, there is less also for British Leyland, Rolls-Royce and the rest.
I come now to the specific order before us. We are asked to pass an order increasing the National Enterprise Board's cash by £300 million. We are being asked to do this about a month before the NEB publishes its annual report and without any proper prospectus. I cannot conceive of any other company in Britain being able to raise vast sums of money from the public, let alone the taxpayer, without any of the necessary information being given.
Why have we got this order tonight when everyone knows that the NEB's annual report will be published in about a month's time? There is no immediate need for cash. There is £64 million in the control of the NEB at the moment—that is enough at least for six months, even if it has to go on investing in other companies in the way that it is. If the NEB were confined, as we would wish to confine it, to what is necessary for British Leyland, or Rolls-Royce, or other firms that come into the category I have mentioned, there would be no need for that extra cash for some time to come.
Of course, the Government have sought to mix the two things up together. We know the reason for that. They have sought to brand us as being against British Leyland. That is the sole purpose

of the Government's activities in putting these two orders together tonight. I have read reports in the Oxford and West Midlands newspapers, and it is clear that the Government hope that, by branding us as being against British Leyland, they will gain some short-term party political advantage. They are willing to damage British Leyland in the short term because they think that there is party political advantage in so doing. Yet at the same time they put their hands on their hearts and say that they want Leyland to have long-term confidence for the future. The Government cannot have it both ways. We shall seek to surb the activities of the NEB. The case for its use of public funds on profitable ventures has not been made out.
There is, however, at this moment a case, as I have said, for strongly supporting British Leyland. I have reiterated what my right hon. Friend said—that we believe that we have to give this confidence to British Leyland. We believe that it is right to do so. We have confidence in what Mr. Edwardes is seeking to do and we shall support British Leyland in every possible way. I hope that I shall not have to read in the Oxford or West Midlands newspapers more of the tripe that has been dished out in recent months by Labour Members.
In view of what has been said today, I urge my right hon, and hon. Friends to give a fair wind to British Leyland by not dividing the House. I also ask them to show their views of the activities of the National Enterprise Board by voting in the Lobby tonight against the motion relating to it.

9.49 p.m.

The Minister of State, Department of Industry (Mr. Gerald Kaufman): If it would not offend my hon. Friend the Member for Liverpool, Walton (Mr. Heifer), I would say that the right hon. Member for Lowestoft (Mr. Prior) has wound up the debate for the Conservative Opposition by showing us the acceptable face of Toryism. Certainly his speech was much different from those made by some of his hon. Friends earlier in the debate. That has been demonstrated in the way in which they have approached the problems of the National Enterprise Board.
The hon. Member for Surrey, North-West (Mr. Grylls), echoing "The Right


Approach", said that the NEB should be abolished. But then, of course, the hon. Member for Surrey, North-West still carries the snow of Selsdon on his boots. The right hon. Member for Lowestoft now says that the role of the NEB should be confined to that of a casualty clearing station. But he has changed his attitude. It is not long ago that he said, in one of these many Labour papers which seem to proliferate up and down the country completely unknown to Labour Members of Parliament—it was, in fact, in the Birmingham Post—about the NEB:
We are committed to holding the firms now owned by the NEB until any hope of recovery is abandoned. But what we must always look for is the prospect of long-term commercial success.
That does not sound to me very much like a casualty clearing station. We shall be coming fairly soon to the question of curing the patient.
The fact is that, little more than two years after it was set up, the NEB is now accepted as an indispensable feature of the industrial landscape. I suspect that even some Conservative Members believe that if the NEB did not exist it would be necessary to invent it. It is carrying out a varied range of activities. Some of them were envisaged when the Board was originally planned. What is significant is that others have been added as the Board has gathered momentum and discovered for itself an even wider role than we originally envisaged.
The NEB acts as an industrial consultant, examining problems and recommending solutions, even when it is not itself involved in either the problem or the solution. Both the private and public industry are increasingly coming to us in the Department and asking for the NEB's services in this way.
The NEB acts as an industrial doctor, seeking to cure the ills of companies—often small companies—which have management or cash problems but which have potential worth exploiting if these problems can be cured. Sometimes they cannot be cured, and critics of the Board in the debate today have seized on these. But it would be a very strange doctor who accepted patients only if they offered him a written guarantee that they would recover.
The Board has an increasingly important regional role. When the Industry Act 1975 was passing through this House, we

promised that there would be NEB offices in the North-West and the North-East. Now, on its own initiative, the NEB has set up boards in these regions, with power to invest on their own initiative, and they have begun to use their power. The only criticisms of those activities that we have heard today have been from my hon. Friends in the North-West and the North-East, who want the boards to be even more active.
The Board has begun to act not only as an industrial broker but as the link partner in industrial consortia. Overseas Governments, looking to Britain for investment and specialised services, see the participation of the NEB as meaning stability and reliability. Large companies in Britain know it, and welcome and, indeed, seek out the NEB as a partner.
The most successful of these consortia has been the United Medical Services, where the NEB's partners are Commercial Union Assurance, London Trust and Orion Bank. They have just won a contract to provide services for two hospitals in Saudi Arabia at a value of £31 million.
The NEB is playing its part in the industrial strategy. It is intervening actively in a number of growth sectors. My right hon. Friend referred to its work in the computer and electronics sector.
More and more small businesses are looking to the NEB for advice and finance When the institutions turn their backs the NEB is ready to listen. Many of its most interesting and challenging investments have been in small businesses making unglamorous but useful products—spark erosion machinery, mixer valves, packaging equipment, corrugated paper machinery. Sometimes these companies are little known. Sometimes they have famous names. Without the intervention of the NEB, Twinlock products would have disappeared from the nation's offices.
The NEB investment which has particularly captured imaginations is in Sinclair Radionics. This company is enterprising and imaginative not only in its products but in their superb design. When the company got into difficulties, nobody would listen—except the NEB. Today, Sinclair Radionics, as an NEB subsidiary, is turning out 4,000 a month of its unique pocket television sets. They are a vogue on the United States market and the toys of Arab oil sheikhs. Sinclair Radionics


is fighting back for Britain in an industrial field which larger and wealthier countries had abandoned to the Japanese without a fight. Without the NEB, Sinclair Radionics would have gone under. Today it is back in profit. That is a remarkable example of what Conservative Members decry as the dead hand of State intervention.
As it gathers momentum, the NEB is now more actively intervening to acquire larger and more important companies such as the Fairey group. I am not surprised that Opposition Members are very critical of these activities, but their ritual denunciations are more tan outweighed by the applause of the workers, who are more and more looking to the NEB as a guardian of their interests. I was bombarded with letters from workers at Fairey asking for the NEB to take it over. I know that I was not the only hon. Member, because several Tory hon. Members passed on such letters to me. I was pleased to be able to send them a favourable response.
But the biggest NEB job is still to act as a holding company for the major rescue cases. We have been absolutely impartial. When we came into office we stumbled on the doorstep over a foundling left to us by the Tory Government—the nationalised Rolls-Royce. We put it under the capable guardianship of the NEB, and last week Rolls-Royce was able to announce not only a profit but one of the most important orders that its outstanding technical qualities, its independent initiative and enterprise, have ever won—the Pan Am deal.
The right hon. Member for Leeds, North-East (Sir K. Joseph) has a nerve when he accuses us of punting with the taxpayers' money, when he was a member of the Cabinet that set the trend—Rolls-Royce, £87½ million just to buy the assets Upper Clyde Shipbuilders and Cammell Laird; Norton-Villiers-Triumph, nearly £5 million; ICL, with £40 million of taxpayers' money committed there—and often with minimal information to Parliament.
The right hon. Gentleman said that on the matter we are discussing today the Government should have put much more information before the House. Coming from him, that is astounding. The

House was asked to nationalise Rolls-Royce with no notice whatever, other than the announcement of the company's failure and the Government's intentions, all made on the same day. As for information, the House was provided with none. We had to make do with an oral statement, and on that flimsy basis Parliament nationalised Rolls-Royce in 17 hours flat.
We had a chorus from the Opposition today, with one refrain: if money is needed for Leyland, sell off its Special Products division. [HON. MEMBERS: "Who said that?"] Every Conservative Member who spoke said it—the right hon. Member for Leeds. North-East, the hon. Members for Rushcliffe (Mr. Clarke) and Bromsgrove and Redditch (Mr. Miller)—and many other hon. Members.
The hon. Member for Birmingham, Stechford (Mr. MacKay) said that Special Products had nothing to do with vehicles and that was why it should be sold off. That is very interesting. Special Products includes Coventry Climax industrial trucks, Aveling Barford trucks. Aveling Marshall tractors and Barford forklift trucks. Even the Scorpion tank has a Jaguar engine. In any case, if Leyland were made to sell off its assets to fund investment, a forced sale would mean buyers snapping up valuable property at bargain prices, and that would be cheating the taxpayer.
This is a very strange time for the Tory Party to seek to deny further finance for the NEB, because, apart from Leyland, Rolls-Royce will make the biggest call on the NEB for funding in the coming months. It is typically irresponsible of the Tories to seek to trip up Rolls-Royce at its moment of triumph. I warn them that if they succeed tonight in voting down the order they will be sabotaging one of the nation's greatest assets.
Then there is Leyland itself. We have heard a great deal from the Tory Opposition today about Mr. Michael Edwardes. They tell us that he is a fine fellow, a sterling chap. We are told that he always says the most sensible things. But the true Tory line on Michael Edwardes is that he should be given every possible assistance short of actual help. The Tories are voting against the order tonight when Mr. Edwardes himself has made it clear that for the good of Leyland there should be no vote at all. This


is what Mr. Edwardes told the Foreign Press Association last month:
If Parliament will give us real support—I do not just mean Government support or a narrow vote or something; I mean real support from all political parties—I believe this will have a tremendous effect on morale and good will and relations between management and workforce.
Divisions can start at the level of Parliament.
Given that support, it would be entirely up to management and the workforce to ' get it right ', and there would be no excuses. Without that support, the finger could be pointed at Parliament ".
That is what Mr. Edwardes said.
The finger is pointed not at Parliament but at the reckless and irresponsible Tory Opposition. And where is the Scottish National Party tonight? It has boasted in Garscadden about how it cares about jobs. But when jobs in Albion Motors across the road from Garscadden are at stake the SNP does not come to the Chamber and does not speak up. The SNP boasts about it devotion to jobs. But there are 8,000 jobs at stake at Rolls-Royce Hillington in Kilbride and the Tories are seeking to vote them down tonight. Where have the Scottish Nationals been?
As for the Tories, not only are they disregarding Mr. Edwardes' words, they are disregarding their own words.

Mr. Prior: Does the Minister think that he is doing a service to the future confidence and ability of British Leyland to survive by saying words which he knows are totally untrue about the Tory Party's attitude?

Mr. Kaufman: The right hon. Gentleman was on record at the time of the Ladywood by-election as being in support of Leyland. He said:
We are committed to finding a way to success for British Leyland".
As the hon. Member for Colne Valley (Mr. Wainwright) pointed out, that success depends on passing the order and the resolution as a package. That is what Mr. Edwardes has said. That is what the National Enterprise Board has said. The Tories say weasel words in favour of Leyland, yet they vote against it. They are even disregarding the words of their own leader. The right hon. Lady the Leader of the Opposition said this about British Leyland:

I do not think it is up to politicians to say what can be done. It is for the management to say how they are going about it. It is then up to the Government to decide how much money they want to put in.
That is what the Leader of the Opposition said when she was grubbing votes in Cowley, Oxford. But tonight her hon. Friends are voting against that and against the judgment of the NEB. They are voting against the judgment of Mr. Michael Edwardes. By voting against this order the Tories are voting against a future for Leyland just as surely as if they voted against the resolution. They will be driving Britain out of the volume car market.
Last week the right hon. Lady said:
We must not settle for a future in which the nation of Lord Nuffield drives Japanese or German cars".
Yet the right hon. Lady and her Friends are voting against this order and are voting for the people only to have Japanese or German cars.

Mr. Norman Lamont: Will the Minister of State answer the point which has been made that the NEB has now got within its resources the £300 million that it needs for British Leyland and that it is quite unnecessary to have the financial limits extended, except that the Government wish to extend the marauding activities of the NEB?

Mr. Kaufman: The hon. Gentleman is quite wrong about that. If the NEB were to do what the hon. Gentleman has said, it would not be able to fund Rolls-Royce, which is the most important call upon it, together with its other continuing commitments.

Sir K. Joseph: But that was not the case put by the Secretary of State or the Government. The Government are seeking, under the guise of Leyland, to gain from the taxpayer £300 million without making any case for it. This is not a Leyland case at all.

Mr. Kaufman: The right hon. Gentleman is trying to get out of it because he knows what he is doing to Rolls-Royce and he is dodging it by attacking the NEB. We are voting for Leyland. We are voting for Rolls-Royce. We are voting for jobs. We shall beat the Conservative Opposition.

Question put:—

The House divided: Ayes 279, Noes 252.

Division No. 164]
AYES
[10.05 p.m.


Abse, Leo
Ewing, Harry (Stirling)
MacFarquhar, Roderick


Allaun, Frank
Faulds, Andrew
McGuire, Michael (Ince)


Anderson, Donald
Fernyhough, Rt Hon E.
MacKenzie, Rt Hon Gregor


Archer, Rt Hon Peter
Flannery, Martin
Mackintosh, John P.


Armstrong, Ernest
Fletcher, L. R. (Ilkeston)
Maclennan, Robert


Ashley, Jack
Fletcher, Ted (Darlington)
McMillan, Tom (Glasgow C)


Ashton, Joe
Foot, Rt Hon Michael
McNamara, Kevin


Atkins, Ronald (Preston N)
Ford, Ben
Madden, Max


Atkinson, Norman
Forrester, John
Magee, Bryan


Bain, Mrs Margaret
Fowler, Gerald (The Wrekin)
Mahon, Simon


Barnett, Guy (Greenwich)
Fraser, John (Lambeth, N'w'd)
Mallalieu, J. P. W.


Barnett, Rt Hon Joel (Heywood)
Freeson, Rt Hon Reginald
Marks, Kenneth


Bates, Alf
Freud, Clement
Marshall, Dr Edmund (Goole)


Bean, R. E.
Garrett, John (Norwich S)
Marshall, Jim (Leicester S)


Beith, A. J.
Garrett, W. E. (Wallsend)
Maynard, Miss Joan


Benn, Rt Hon Anthony Wedgwood
George, Bruce
Meacher, Michael


Bennett, Andrew (Stockport N)
Gilbert, Dr John
Mellish, Rt Hon Robert


Bidwell, Sydney
Ginsburg, David
Mendelson, John


Bishop, Rt Hon Edward
Golding, John
Mikardo, Ian


Blenkinsop, Arthur
Gould, Bryan
Millan, Rt Hon Bruce


Boardman, H.
Gourlay, Harry
Miller, Dr M. S. (E Kilbride)


Booth, Rt Hon Albert
Graham, Ted
Mitchell, Austin


Boothroyd, Miss Betty
Grant, George (Morpeth)
Molloy, William


Bottomley, Rt Hon Arthur
Grant, John (Islington C)
Moonman, Eric


Boyden, James (Bish Auck)
Grocott, Bruce
Morris, Alfred (Wythenshawe)


Bradley, Tom
Hardy, Peter
Morris, Charles R. (Openshaw)


Bray, Dr Jeremy
Harrison, Rt Hon Walter
Morris, Rt Hon J. (Aberavon)


Brown, Hugh D. (Provan)
Hart, Rt Hon Judith
Moyle, Roland


Brown, Robert C. (Newcastle W)
Hattersley, Rt Hon Roy
Mulley, Rt Hon Frederick


Buchan, Norman
Hayman, Mrs Helene
Murray, Rt Hon Ronald King


Buchanan, Richard
Healey, Rt Hon Denis
Newens, Stanley


Butler, Mrs Joyce (Wood Green)
Heffer, Eric S.
Noble, Mike


Callaghan, Rt Hon J. (Cardiff SE)
Hooley. Frank
Oakes, Gordon


Callaghan, Jim (Middleton &amp; P)
Hooson, Emlyn
Ogden, Eric


Campbell, Ian
Horam, John
O'Halloran, Michael


Canavan, Dennis
Howell, Rt Hon Denis (B'ham, Sm H)
Orbach, Maurice


Cant, R. B.
Howells, Geraint (Cardigan)
Orme, Rt Hon Stanley


Carmichael, Neil
Hoyle, Doug (Nelson)
Ovenden, John


Carter, Ray
Huckfield, Les
Padley, Walter


Carter-Jones, Lewis
Hughes, Rt Hon C. (Anglesey)
Palmer, Arthur


Cartwright, John
Hughes, Robert (Aberdeen N)
Park, George


Castle, Rt Hon Barbara
Hughes, Roy (Newport)
Parker, John


Clemitson, Ivor
Hunter, Adam
Parry, Robert


Cocks, Rt Hon Michael (Bristol S)
Irving, Rt Hon Sir A. (Edge Hill)
Pavitt, Laurie


Cohen, Stanley
Irving, Rt Hon S. (Dartford)
Pendry, Tom


Coleman, Donald
Jackson, Colin (Brighouse)
Penhaligon, David


Conlan, Bernard
Jackson, Miss Margaret (Lincoln)
Perry, Ernest


Corbett, Robin
Janner, Greville
Price, C. (Lewisham W)


Cowans, Harry
Jay, Rt Hon Douglas
Price, William (Rugby)


Cox, Thomas (Tooting)
Jeger, Mrs Lena
Radice, Giles


Craigen, Jim (Maryhill)
Jenkins, Hugh (Putney)
Rees, Rt Hon Merlyn (Leeds S)


Crawshaw, Richard
Johnson, James (Hull West)
Richardson, Miss Jo


Cronin, John
Johnson, Walter (Derby S)
Roberts, Albert (Normanton)


Crowther, Stan (Rotherham)
Jones, Alec (Rhondda)
Roberts, Gwilym (Cannock)


Cryer, Bob
Jones, Barry (East Flint)
Robinson, Geoffrey


Cunningham, Dr J. (Whiten)
Jones, Dan (Burnley)
Roderick, Caerwyn


Davidson, Arthur
Judd, Frank
Rodgers, George (Chorley)


Davies, Bryan (Enfield N)
Kaufman, Gerald
Roqers, Rt Hon William (Stockton)


Davies, Denzil (Llanelli)
Kelley, Richard
Rooker, J. W.


Davies, Ifor (Gower)
Kerr, Russell
Roper, John


Davis, Clinton (Hackney C)
Kilroy-Silk, Robert
Rose, Paul B.


Deakins, Eric
Kinnock, Neil
Ross, Stephen (Isle of Wight)


Dean, Joseph (Leeds West)
Lambie, David
Ross, Rt Hon W. (Kilmarnock)


Dell, Rl Hon Edmund
Lamborn, Harry
Rowlands, Ted


Dempsey, James
Lamond, James
Ryman, John


Doig, Peter
Leadbitter, Ted
Sandelson, Neville


Dormand, J. D.
Lee, John
Sedgemore, Brian


Douglas-Mann, Bruce
Lestor, Miss Joan (Eton &amp; Slough)
Selby, Harry


Duffy, A. E. P.
Lever, Rt Hon Harold
Shaw, Arnold (Ilford South)


Dunn, James A.
Lewis, Ron (Carlisle)
Sheldon, Rt Hon Robert


Dunnett, Jack
Litterick, Tom
Shore, Rt Hon Peter


Eadie, Alex
Lomas, Kenneth
Short, Mrs Renée (Wolv NE)


Edge, Geoff
Loyden, Eddie
Silkin, Rt Hon John (Deptford)


Ellis, John (Brigg &amp; Scun)
Luard, Evan
Silkin, Rt Hon S. C. (Dulwich)


English, Michael
Lyons, Edward (Badlord W)
Silverman, Julius


Ennals, Rt Hon David
Mabon, Rt Hon Dr J. Dickson
Skinner, Dennis


Evans, Fred (Caerphilly)
McCartney, Hugh
Smith, John (N Lanarkshire)


Evans, Ioan (Aberdare)
McDonald, Dr Oonagh
Snape, Peter


Evans, John (Newton)
McElhone, Frank
Spearing, Nigel




Spriggs, Leslie
Torney, Tom
Whitlock, William


Stallard, A. W.
Tuck, Raphael
Williams, Rt Hon Alan (Swansea W)


Steel, Rt Hon David
Varley, Rt Hon Eric G.
Williams, Alan Lee (Hornch'ch)


Stewart, Rt Hon M. (Fulham)
Wainwright, Edwin (Dearne V)
Williams, Rt Hon Shirley (Hertford)


Stoddart, David
Wainwright, Richard (Colne V)
Wilson, Rt Hon Sir Harold (Huyton)


Stott, Roger
Walker, Harold (Doncaster)
Wilson, William (Coventry SE)


Strang, Gavin
Walker, Terry (Kingswood)
Wise, Mrs Audrey


Strauss, Rt Hon G. R.
Ward, Michael
Woodall, Alec


Summerskill, Hon Dr Shirley
Watklns, David
Woof, Robert


Swain, Thomas
Watkinson, John
Wrigglesworth, Ian


Thomas, Jeffrey (Abertillery)
Weetch, Ken
Young, David (Bolton E)


Thomas, Mike (Newcastle E)
Weitzman, David



Thomas, Ron (Bristol NW)
Wellbeloved, James
TELLERS FOR THE AYES:


Thorne, Stan (Preston South)
White, Frank R. (Bury)
Mr. James Hamilton and


Tierney, Sydney
White, James (Pollok)
Mr. Joseph Harper.


Tinn, James






NOES


Adley, Robert
Fookes, Miss Janet
Lloyd, Ian


Aitken, Jonathan
Forman, Nigel
Loveridge, John


Alison, Michael
Fowler, Norman (Sutton C'f'd)
Luce, Richard


Arnold, Tom
Fox, Marcus
McAdden, Sir Stephen


Atkins, Rt Hon H. (Spelthorne)
Fraser, Rt Hon H. (Stafford &amp; St)
McCrindle, Robert


Atkinson, David (Bournemouth, East)
Fry, Peter
McCusker, H.


Awdry, Daniel
Gardiner, George (Reigate)
Macfarlane, Neil


Baker, Kenneth
Gardner, Edward (S Fylde)
MacGregor, John


Banks, Robert
Gilmour, Rt Hon Ian (Chesham)
MacKay, Andrew (Stechford)


Bendall, Vivian (Ilford North)
Gilmour, Sir John (East Fife)
Macmillan, Rt Hon M. (Farnham)


Bennett, Dr Reginald (Fareham)
Glyn. Dr Alan
McNair-Wilson, M. (Newbury)


Benyon, W.
Goodhart, Philip
McNair-Wilson, P. (New Forest)


Biffen, John
Goodhew, Victor
Madel, David


Biggs-Davison, John
Goodlad, Alastair
Marshall, Michael (Arundel)


Body, Richard
Gorst, John
Marten, Neil


Boscawen, Hon Robert
Gow, Ian (Eastbourne)
Mates, Michael


Bottomley, Peter
Gower, Sir Raymond (Barry)
Mather, Carol


Bowden, A. (Brighton, Kemptown)
Grant, Anthony (Harrow C)
Maude, Angus


Boyson, Dr Rhodes (Brent)
Gray, Hamlsh
Maudling, Rt Hon Reginald


Braine, Sir Bernard
Griffiths, Eldon
Mawby, Ray


Brittan, Leon
Grist, Ian
Maxwell-Hyslop, Robin


Brocklebank-Fowler, c.
Grylls, Michael
Mayhew, Patrick


Brooke, Peter
Hall-Davis, A. G. F.
Meyer, Sir Anthony


Brotherton, Michael
Hamilton, Michael (Salisbury)
Miller, Hal (Bromsgrove)


Brown, Sir Edward (Bath)
Hampson, Dr Keith
Mills, Peter


Bryan, Sir Paul
Hannam, John
Miscampbell, Norman


Buchanan-Smith, Alick
Harrison, Col Sir Harwood (Eye)
Mitchell, David (Basingstoke)


Buck, Antony
Harvie Anderson, Rt Hon Miss
Moate, Roger


Budgen, Nick
Haselhurst, Alan
Molyneaux, James


Bulmer, Esmond
Hastings, Stephen
Monro, Hector


Burden, F. A.
Havers, Rt Hon Sir Michael
Montgomery, Fergus


Butler, Adam (Bosworth)
Hayhoe, Barney
Moore, John (Croydon C)


Carson, John
Heath, Rt Hon Edward
More, Jasper (Ludlow)


Chalker, Mrs Lynda
Heseltine, Michael
Morgan, Geraint


Churchill, W S.
Hicks, Robert
Morgan-Giles, Rear-Admiral


Clark, Alan (Plymouth, Sutton)
Higgins, Terence L.
Morris, Michael (Northampton S)


Clark, William (Croydon S)
Hodgson, Robin
Morrison, Hon Peter (Chester)


Clarke, Kenneth (Rushcliffe)
Holland, Philip
Mudd, David


Clegg, Walter
Hordern, Peter
Neave, Airey


Cockcroft, John
Howe, Rt Hon Sir Geoffrey
Nelson, Anthony


Cooke, Robert (Bristol W)
Howell, David (Guildford)
Neubert, Michael


Cope, John
Hunt, David (Wirral)
Newton, Tony


Cormack, Patrick
Hunt, John (Ravensbourne)
Nott, John


Costain, A. P.
Hurd, Douglas
Onslow, Cranley


Craig, Rt Hon W. (Belfast E)
Hutchison, Michael Clark
Oppenheim, Mrs Sally


Crouch, David
Irving, Charles (Cheltenham)
Page, John (Harrow West)


Crowder, F. P.
James, David
Page, Rt Hon R. Graham (Crosby)


Dean, Paul (N Somerset)
Johnson Smith, G. (E Grinstead)
Page, Richard (Workington)


Dodsworth, Geoffrey
Jones, Arthur (Daventry)
Parkinson, Cecil


Douglas-Hamilton, Lord James
Jopling, Michael
Pattle, Geoffrey


Drayson, Burnaby
Joseph, Rt Hon Sir Keith
Percival, Ian


du Cann, Rt Hon Edward
Kaberry, Sir Donald
Peyton, Rt Hon John


Durant, Tony
Kimball, Marcus
Pink, R. Bonner


Dykes, Hugh
King, Evelyn (South Dorset)
Powell, Rt Hon J. Enoch


Eden, Rt Hon Sir John
King, Tom (Bridgwater)
Prentice, Rt Hon Reg


Edwards, Nicholas (Pembroke)
Kitson, Sir Timothy
Price, David (Eastleigh)


Elliott, Sir William
Knight, Mrs Jill
Prior, Rt Hon James


Emery, Peter
Knox, David
Pym, Rt Hon Francis


Eyre, Reginald
Lamont, Norman
Raison, Timothy


Fairbairn, Nicholas
Langford-Holt, Sir John
Rathbone, Tim


Fairgrieve, Russell
Latham, Michael (Melton)
Rees, Peter (Dover &amp; Deal)


Farr, John
Lawrence, Ivan
Rees-Davies, W. R.


Fell, Anthony




Finsberg, Geoffrey
Lawson, Nigel
Renton, Rt Hon Sir D. (Hunts)


Fisher, Sir Nigel
Lester, Jim (Beeston)
Renton, Tim (Mid-Sussex)


Fletcher, Alex (Edinburgh N)
Lewis, Kenneth (Rutland)
Rhodes, James R







Ridley, Han Nicholas
Smith, Timothy John (Ashfield)
van Straubenzee, W. R.


Ridsdale, Julian
Speed, Keith
Vaughan, Dr Gerard


Rifkind, Malcolm
Spence, John
Viggers, Peter


Roberts, Wyn (Conway)
Spicer, Michael (S Worcester)
Wakeham, John


Ross, William (Londonderry)
Sproat, Iain
Walder, David (Clitheroe)


Rossi, Hugh (Hornsey)
Stainton, Keith
Walker, Rt Kon P. (Worcester)


Rost, Peter (SE Derbyshire)
Stanbrook, Ivor
Wall, Patrick


Royle, Sir Anthony
Stanley, John
Walters, Dennis


Sainsbury, Tim
Steen, Anthony (Wavertree)
Weatherill, Bernard


St. John-Stevas, Norman
Stewart, Ian (Hitchin)
Wells, John


Scott, Nicholas
Stokes, John
Whitelaw, Rt Hon William


Shaw, Giles (Pudsey)
Stradling Thomas, J.
Wiggin, Jerry


Shelton, William (Streatham)
Tapsell, Peter
Winterton, Nicholas


Shepherd, Colin
Taylor, R. (Croydon NW)
Wood, Rt Hon Richard


Shersby, Michael
Tebbitt, Norman
Young, Sir G. (Ealing, Acton)


Silvester, Fred
Temple Morris, Peter
Younger, Hon George


Sims, Roger
Thatcher, Rt Hon Margaret



Sinclair, Sir George
Thomas, Rt Hon P. (Hendon S)
TELLERS FOR THE NOES:


Skeet, T. H. H.
Townsend, Cyril D.
Mr, Spencer Le Marchant and


Smith, Dudley (Warwick)
Trotter, Neville
Mr. Anthony Berry

Question accordingly agreed to.

Resolved.
That the draft National Enterprise Board (Financial Limit) Order 1978, which was laid before this House on 3rd April, be approved.

BRITISH LEYLAND LIMITED (FINANCIAL ASSISTANCE)

Resolved,
That this House authorises the National Enterprise Board on the direction of the Secretary of State, given under section 3 of the Industry Act 1975, to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972 (as amended by section 22 of, and Part 1 of Schedule 4 to, the Industry Act 1975, and section 1 of the Industry (Amendment) Act 1976) sums to British Leyland Limited or any of its subsidiaries not exceeding in the aggregate £150 million, being sums in addition to the £30 million previously paid by the National Enterprise Board to British Leyland Limited under that section 8.—[Mr. Varley.]

EUROPEAN COMMUNITY (FARM STRUCTURE)

10.23 p.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): I beg to move,
That this House takes note of Commission Documents Nos. R/3069/77 and R/3121/77 on Farm Structure.
I must first congratulate the Scrutiny Committee and its Chairman, the right hon. Member for Bournemouth, West (Sir J. Eden) on their excellent report. Taken together the two documents that are the subject of this motion constitute a formidable quantity of paper. The Scrutiny Committee has done the House a service in dealing with all this material so concisely and in giving the House the benefit of its penetrating conclusions.
The Committee's report sets out the main points of the Commission's report on the application of the socio-structural directives in 1975, which it also summarises, so I need not detain the House with a dissertation on this subject. I should, however, indicate that we entirely agree with the conclusion of the Scrutiny Committee's report that there is insufficient experience of the operation of the directives to form a basis for proposing major changes in them. In addition, we endorse the report's criticism of the Commission's explanation of the reasons why directive 72/160 has failed to promote structural improvement.
As the Scrutiny Committee's report says, the broader factors are what govern the propensity of farmers to give up their land. We discovered, while operating our own farm structure schemes, that Government incentives in this direction are unlikely to be cost-effective and in the United Kingdom they had very little effect at all. Like the Scrutiny Committee, we are also against any measures to curtail aid to efficient dairy producers.
So far as the analysis of the Commission's actual proposals is concerned, here again I can only agree with the general conclusions of the Scrutiny Committee's report. As we see it, a number of points of principle arise. One of the most important of these is the increase in expenditure under the FEOGA guidance section

which is involved, bearing in mind, as we have already noted, the lack of experience so far in the Community as a whole of the operation of the present provisions. There is also the further differentiation of FEOGA aid in favour of certain regions of the Community, which we consider highlights the need to ensure that Community money is spent in a cost-effective way.
We agree with the Scrutiny Committee that the reduction in the minimum area qualifying in less-favoured and mountain areas in Italy for the LFAD compensatory allowances could hinder improvements in farm structure. So also could tie concession proposed for parts of Italy and Ireland under which FEOGA reimbursement would be payable under directive 160, even if the land released by the annuitants went to farmers with no prospect of reaching the comparable income.
This concession also seems to cut across the Commission's proposal to strengthen incentives under this directive where land is released to farmers with development plans. The special premium linked to rental values which is proposed would, moreover, as is indicated in the Scrutiny Committee's report, cause substantial administrative problems and give rise to anomalies in United Kingdom conditions.
For instance, the premium actually received by a farmer could vary from £50 per hectare to over £500 per hectare in the same region of the United Kingdom. There would, furthermore, be a tendency for the lowest payments to be made in areas of poor land, where farm structure is in general also poor. In any event, as I have said, our experience leads us to doubt the effectiveness of incentives of this kind, and I am glad that the report goes along with this conclusion.
The proposed Commission drainage initiative in less-favoured areas in the West of Ireland raises both the question of the regional differentiation of rates of FEOGA reimbursement and that of possible impacts on Northern Ireland. We should not, of course, wish to oppose cost-effective measures to accelerate drainage programmes in Ireland, but the programmes will need careful scrutiny. We shall also wish to pursue the question of what seems to us to be the illogicality of excluding from the special aids analogous areas in Northern Ireland, especially in view of the possibility of


fruitful cross-border co-operation in certain catchment areas.
The Commission's proposal to amend directive 72/159 is of little interest to this country and, indeed, we see no justification for any changes in the ground rules of that directive. The House will, I am sure, be glad to know that our EEC capital grant scheme, the farm and horticulture development scheme, is now very much a going concern following the changes we made in June 1976 and the ADAS advisory effort that has been put in. There are, however, some detailed changes we should like to see in the directives and we shall be pursuing these as the opportunity offers. We do not, however, agree with the NFU and COPA that in general the Commission's proposals are inadequate. I am glad to see that the Committee's report takes the point that as the proposals stand they are costly and that, as has been observed, they have no very sound basis in experience.
In conclusion, I should like to affirm that our general stance at present is to seek to ensure that Community funds are disbursed in a cost-effective way, to resist measures that do not make sense in United Kingdom conditions or in terms of the basic objectives of the Community's socio-structural policy, and to secure improvements on detailed aspects of the directives. Subject to the view that the House may express tonight, both on the Commission's proposals and on the Commission's second report, we shall continue to pursue these objectives.

10.30 p.m.

Mr. Robert Hicks: We are grateful to the Minister for explaining the Government's attitude to these documents.
On the surface, this debate may appear somewhat detailed—relating as it does to proposed amendments to farm structures, less-favoured area programmes, drainage schemes and various matters connected with farm modernisation—but in fact it raises questions of substance on the future operation of the Community's agricultural policy, particularly with regard to the cost-effectiveness of the measures, reviewed in the Commission's report, which are designed to stimulate agricultural reform.
The Community's farm policy has been subjected over the years to various pressures and criticisms. As with most political subjects, we have all tended to take the favourable aspects for granted and to concentrate our attention on those facets which give cause for concern. In this context, that concern manifests itself in the real worry about the disposal of structural farm surpluses and—equally important—a consideration of how we are to prevent a further spreading of the problem of surpluses to other farm commodities in the not-too-distant future. It is in the light of the prevailing and potentially more worrying situation that we should consider these documents.
The Commission's proposals highlight the Community's dilemma. The suggestions in these directives have not only agricultural but political and regional implications. Some aspects of fundamental reform should be seen in a regional and social light rather than in a strictly agricultural light.
As one who represents a peripheral part of the United Kingdom, I am aware of the feeling of neglect and frustration that our problems in the regions are not fully understood in Whitehall or possibly in Brussels. But we must resist the temptation to assume that, because many of these problems concern other parts of the Community, we should dismiss them. That would be totally wrong.
We must examine these proposals in the light of the Community's future requirements of its farm policy. Is directive 72/159, relating to farm modernisation, a national aid which will put no direct cost on Community funds? If, as I believe, that is so, would not the Minister agree that this practice is in effect subsidising farm incomes, and thus does little to contribute to basic restructuring? Also, do not the products of these smaller units receive Community funds from the guarantee sector of the farm budget?
What will be the cost to Community funds of the amendment in directive 75/268 in respect of farming in hill and less favoured areas? The Minister rightly pointed out the concern felt by the Department about the cost-effectiveness of certain of these proposals. Will he go into a little more detail and say how much is involved?
Does the Minister really believe that the reduction in the qualifying area for headage payments in certain parts of the Community from three hectares to two hectares and the increased level of payments in these areas is consistent with the declared aim of improving farm structures, on the one hand, and reducing structural surpluses, on the other?
In the context of the directive concerning less favoured areas, may I ask the Minister also what representations his Department made in respect of the application of this directive to Britain? The proposals concern in the main other parts of the Community, but there is a real problem in that certain parts of Britain meet the necessary criteria to be considered as less favoured areas, but, because the Government chose to go for the old hill cow and hill ewe subsidies, those areas now fall outside this provision.
A comparison of areas in the United Kingdom which do not qualify under the less-favoured area directive with other parts of the Community in which farmers qualify shows that an injustice is being done to the farmers of approximately 1½ million acres of such land in the United Kingdom. Would not the Minister agree that, as the Commission is looking at amendments to these directives, the time is appropriate for a review of the land within the United Kingdom that should qualify to be classified as less favoured areas? It has been suggested, for example, that some parts of France that produce milk are classified as less favoured areas. This is not so in Britain.
It is proposed in directive 72/160, which concerns measures to encourage the cessation of farming, to create an additional special premium relating to the rental value of the land. This would be a supplement to the existing arrangements involving payment of a lump sum or an annuity. What will the cost be? What representations has the Department made to the Commission as to the effectiveness of these proposals? As the Minister rightly implied, some of us doubt from experience how effective these measures are. There is reason to doubt the role of a financial incentive in persuading people to leave farming.
I conclude by adding a few general comments to my remarks about the Commission's

report on the measures aimed at achieving reforms necessary to improve the structure of Community agriculture. It is true that progress has been made. It is only necessary to look at the statistics to see the fall in the number engaged in full-time agriculture. Would not the Minister agree that there is still a long way to go and that it is more difficult now to persuade those who have not already decided to leave agriculture? There is a natural wastage, but will the Minister quantify the numbers of those expected to leave as a result of these inducements, as opposed to leaving for other reasons?
We on this side of the House express a general concern about the lack of activity that has resulted from these measures, because there is no doubt in our minds that we still have a long way to go in implementing a meaningful programme of farm reorganisation and farm modernisation throughout the Community if we are to achieve the two objects which I mentioned at the beginning of my remarks, which are, first, to promote a better farm structure and, secondly, to avoid unnecessary farm surpluses.

10.41 p.m.

Mr. Wm. Ross: The Minister will no doubt be aware of the reaction in Northern Ireland to any suggestion that the Irish Republic is getting a better deal out of the EEC than is the Northern Ireland part of the United Kingdom. In the light of the reaction that is often heard in the Press, and sometimes deliberately fostered in Northern Ireland in this regard, I echo the words of the hon. Member for Bodmin (Mr. Hicks) when he said that it was time we reassessed the areas of less favoured land in the United Kingdom, and I say in particular Northern Ireland. This is a serious bone of contention and it is a matter on which I should like the Minister to give some sort of understanding this evening.
Given that there is always an adverse reaction in Northern Ireland to any suggestion that the Republic of Ireland is getting a better deal than is Northern Ireland, there would be an even worse reaction if any idea arose in Northern Ireland that something that was done in the Republic was having an adverse effect on the farmers in Northern Ireland.
In that respect I draw the Minister's attention to the cross-border rivers which run from the Republic into Northern Ireland, and specifically those rivers which flow into Lough Neagh or Lough Erne, because both those loughs are used in one way or another in Northern Ireland for drainage and fishing purposes, and they are subject to flooding along the shores. Sometimes heavy rainfall over the catchment area of the rivers concerned can cause those loughs to rise very rapidly, with extremely serious results in the low-lying areas surrounding them.
In those circumstances, has any thought been given by the Department of Agriculture in Northern Ireland, and by the Minister of Agriculture, Fisheries and Food here, to what steps should be taken to prevent any serious consequences arising from works taking place in the Irish Republic? The rivers are principally the Erne and the Blackwater, but no doubt there are other smaller streams. We also have the problem that will arise, inevitably, if these rivers are drained and banked in the Republic, and the downstream sections are not banked. The flooding that would result would be immediate and immense as soon as the drainage schemes commenced, and this is a matter which I hope the Minister has taken on board.
There is also the problem of the River Finn, which flows into the Mourne from County Donegal. I do not think that the problem is as serious there as in other places, but no doubt there will be a problem in that area too, although of lesser dimensions.
I now deal briefly with the areas to be drained. I note that these are restricted to catchment areas of 30,000 hectares and field drainage areas of 100,000 hectares. What puzzles me is that according to the Twelfth Report of the Select Committee on European Legislation the machinery costs in field drainage are restricted to 5 per cent. of the costs. Is this correct? If it is, I must tell the Minister that nobody does land drainage in that way any more. If machinery costs are restricted to 5 per cent. of the total cost, that would have to imply hand labour in the digging of the ditches for the land drains. If that is so, it could not be said that the money was being spent in a cost-effective way under modern conditions.

Will the Minister comment on that aspect of the papers before us?
I turn briefly to the whole contention that it is possible to improve the farm structure through getting small farmers to leave their land and allow it to be sold to someone else. The plain truth is that all these schemes simply have not worked, for a variety of reasons, not least of which is the rate of inflation in Western society today. That inflation rate, even in the remaining lifetime of a person of 55, has been seen very rapidly to erode the economic advantages that are supposed to accrue to the former owner from the loss of his land. People are no longer prepared to believe in the supposed advantages. They are no longer prepared to take the risk. Therefore, the contention fails on that ground alone.
In addition, there is among small farmers everywhere—in Ireland perhaps more than in most places—an almost mystical attachment to the land they own. This is well known to anyone engaged in farming. To those people the property they own is far beyond any money price. In those circumstances the pride of ownership overrules any economic advantage that can accrue to the owner.
On those two facts alone—thoueh no doubt others will be brought forward this evening—this whole concept founders. I believe that it will continue to founder. It just cannot float.
On the basis of my experience, and looking at the farming structure in my own area, where farms are growing in size, I believe that a change in the structure will come about only through the death of the present owners and through their children and grandchildren being unwilling to live the existence that their forebears had. Young people are no longer prepared to put up with that existence. If they can get a better job they will go to it, even if it means going quite a long way. They will not return. When the old folk die off the land is sold, and in that way the farms will naturally increase in size. There is no way of speeding up that process.
According to these documents, the farms that have increased in size are mainly cattle and dairy farms. They do not mention sheep farms, but they are fairly large in acreage anyway, and are often one-man and two-man farms, or at any rate family farms. They do not need


further to increase in size. Quite a lot are as big as the family can handle now in many parts of the country, so we cannot expect them to grow very much.
I suggest that the dairy and cattle farms have increased in size simply because they are not labour-intensive. They are machinery-intensive, if one is going in for dairying and silage. They may be intensive in the same sense to some extent in cattle farms, but one family—the farmer and his son; or perhaps one should say two families—can handle a very large acreage.
We are all aware that such farms are not normally found in areas suitable for grain growing. Grain farms in, for instance, Eastern England are a fair size anyway, and they are highly mechanised. Such farms may increase in size quite a bit yet, but I doubt that. We may well have seen the end of the major part of growth for the present generation in that direction as well.
These directives represent an attempt to speed up a natural process in the growth of farms. It is an attempt that will fail. The process will take place naturally anyway, and I believe that we are wasting money in trying to do it in this way.

10.50 p.m.

Mr. Peter Mills: I must declare an interest in these matters. As one surveys the Community scene today, and the common agricultural policy in particular, one must agree that these directives are of great importance. I believe that the hon. Member for Londonderry (Mr. Ross) has the matter slightly wrong, and I shall come to that in a minute. In my view, in the context of the problems of the Community, of the CAP and of surpluses, for the long term we must take measures such as those proposed in the directives.
In the short term, it may well be that it is a matter of price—the end price—that can be controlled in order to deal with some of the surpluses in some commodities but—this is where I think that the hon. Member for Londonderry has it slightly wrong—the fact is that in the Community as a whole there are areas that have a long way to go.
There are areas where the process of modernisation and amalgamation into

more viable farms with the right structure is already under way. I think that Northern Ireland presents an excellent example of that, with small viable farms. Many of them have the structure right because they are family farms. In the South-West of England we have already made good progress. If I may speak of my own past for a moment, I started with 28 acres—hardly a viable farm nowadays—but in the South-West now the average is considerably higher.
Already many of the policies set out in these directives are in operation in certain parts of the United Kingdom, and in the South-West in particular. We have had farm amalgamations. We have had viable units set up, and we have modernised. Already the process is under way, but in other parts of the Community—in certain parts of France and Germany, for example—there is a long way to go before farming comes up to the standard of the excellent small family farms of the South-West or, indeed, of Northern Ireland.
There is, therefore, a difference, and I believe that these directives can play a role in the future in dealing with the problems of the Community as a whole and of the CAP in particular.
The Commission's single aim, as it is put, is
to help farmers who are willing and able to do so to attain 'comparable' incomes, and provide an alternative non-agricultural income or occupation, or an early retirement annuity, for farmers who do not wish or cannot attain this level.
I am sure that we should all agree with that aim. One hears constantly about the problems of very small farmers and of farm workers in earning incomes comparable with those of other sections of the community. I am sure that that is right, but one must try to ensure that one does not set the end prices so high that the big farmers make large profits and the very small farmer is still struggling to obtain a living standard—a living wage, if one cares to call it that.
Therefore, I believe that in the Community as a whole we should look seriously at providing some help to the very small farmers who can never attain that position. That is what this is all about. It is sad to have to say that in practice the measures have not worked very much. In my view, Governments within the Community are not taking these problems


seriously enough. We in this country take them seriously. We have quite a good track record in dealing with these matters.
Unless these measures are effective, I am certain that the very small farmers, not in this country but elsewhere in the Community, will stick it out. They will become more and more stubborn in refusing to move from the land, more and more determined to stay and go on farming. However much the cut in end price, they will have no alternative work, no other occupation, to go to. I believe, therefore, that these directives are very important and that many of the other measures that the Community is dealing with are merely tinkering with the problem. Until we get the structure right, we cannot deal with the surpluses or with these very small farmers desperately trying to live on the small acreages.
Farm modernisation is crucial both to the farmer and the consumer. One cannot expect the consumer to pay high prices for various farm products, and it is right that we should try to make our farms modern so that they can have an output at reasonable cost to the consumer. I am all for farm modernisation, and I hope that the directive on modernisation can go ahead.
But when considering the directive on payments to outgoers, I emphasise again that it is not much use paying a small farmer to go out of business if we have not provided some alternative work, some alternative hope for him, so that he and his children can make a decent living. There are many areas in other countries of the Community where there is no alternative work or no hope for such people. So we have to think not only of payments to the out-goers but of alternative work for them. That must cost money. Time is needed for these things to have a genuine impact. Time must be given. We cannot do it overnight. It takes a very long time to persuade people to make such changes.

Mr. Nigel Spearing: Can the hon. Gentleman resolve this apparent dilemma? He has laid great emphasis upon changing the structure of farm holdings, on the assumption, I presume, that that will provide viable units. But it will not necessarily decrease the amount of land in cultivation. If that is

so, presumably surpluses will remain the same, particularly if lowland farms become more efficient. Unless the structure actually takes land out of cultivation—and that would be the marginal, less accessible land, which, apparently, is not the policy—surely the policy that the hon. Gentleman is advocating will fail even on his own criteria.

Mr. Mills: That is a fair point. My answer is that I do think that in some circumstances it is right to take land out of production. The land I am thinking about is the poor scrubby land in the Community which could be used either for forestry or for the "playground"—the sort of land necessary in the modern world for holidaying and other pursuits. I believe that in certain areas it is just not feasible to go on farming on such land. I am talking not about this country but about certain areas within the rest of the Community. I believe that there is a problem, but that forestry can play a considerable role on some of the poorer land—and in the long term that would be of great benefit to the Community itself and to the nation concerned.
The directive talks about training. How right that is. It is important to retrain people. The Governments must pay attention to this aspect, particularly with regard to the younger members of these small farming families.
Then there is the question of the less favoured areas. Here I perhaps disagree slightly with my hon. Friend the Member for Bodmin (Mr. Hicks). I believe that the problem of the less-favoured areas is a social problem more than a farming problem. Again it is a matter of many smallholdings in upland areas which are very difficult ever to make viable. The recognition of this as a social problem lay behind the whole idea of the hill-cow subsidy in days gone by. Admittedly it had the advantage of ensuring the production of store cattle for fattening lower down. But there was a real social element in giving those subsidies, for otherwise there would be depopulation of the uplands areas. This is the sort of thing that ought to be done not quite so much by the Community as by national Governments, and it should be dealt with as a social problem rather than as a farming problem.
The whole problem with the set-up in Brussels at the moment is that far too


much money is being directed at the guarantee side and at supporting farmers in production, rather than seeing that the money is used for the Regional Development Fund and other alternative work within the more difficult areas.
I hope that we shall urge the Government to look at these various directives very carefully indeed. It is not such an urgent problem in this country as in other countries within the Community. We have already gone a long way towards dealing with these matters. The other countries in the Community need to put their house in order, in a sense. We have started on that road under various Governments over a number of years. We have begun to get the structure right. The other countries within the Community have not taken the message seriously.
I urge the Minister to redouble his efforts to see that other Agriculture Ministers within the Community start to take this matter seriously, so that there will be pressure for more of the funds within the Community to be used in dealing with the whole of the problem that I have tried to outline. It is essential that they do this, otherwise surpluses will go on and on and on. Until we get the structure right and provide alternative work for many of these small farmers within the Community, these surpluses will go on and on and on.

11.3 p.m.

Mr. Richard Body: I am very glad that my hon. Friend the Member for Devon, West (Mr. Mills) acknowledges that some of our land is not fit to be farmed, but I think I am right in saying that, just across the border from him, 700 acres of Exmoor was brought into cultivation, not because it is land which should be cultivated but because of the system of grants and subsidies which makes it possible.
Like my hon. Friend the Member for Bodmin (Mr. Hicks), I was disappointed that the Parliamentary Secretary gave no estimate of the cost involved as a result of these directives. Five years have now gone by and I should have thought that we could have some estimate of at least the visible cost of what has so far been done. The visible cost would be the money that has actually been received by the farmers who have been the beneficiaries of these schemes, but there is

also the invisible cost, and it is this that disturbs me, as I think it must disturb anyone who is concerned with the level of efficiency of British or European agriculture. The invisible cost is what must be paid out by those who contribute to the scheme, namely, the taxpayers themselves.
The whole essence of what is intended under these directives is that there should be a transfer of resources from the efficient to the inefficient, from those who are able to pay taxes, and who therefore by that standard are at least reasonably efficient, to those who are inefficient in a sense and would be out of business, or very nearly out of business, were it not for the grants and subsidies that are available.
The purpose of these directives, in other words, is that the strong should be weakened in the hope that the weak should be strengthened. That, surely, is no prescription for raising the level of efficiency of either British or European agriculture. This is something that will be of great importance from now on, because we are now facing structural surpluses. These are chronic and permanent surpluses, which will pile up from now on.
I like to think that there are many efficient farmers in Lincolnshire. I am delighted that my hon. Friend the Member for Gainsborough (Mr. Kimball) is here, as he also comes from a county which is capable of growing food much more efficiently than Devon and Cornwall, where the farmers thrive on grants and subsidies. My part of England is extremely apprehensive about the way in which these surpluses are mounting. If they are to continue to mount, the efficient producer will be at a grave disadvantage, because he has to compete against those marginal producers who will be kept in business as a result of schemes of this kind. They will, therefore, face unfair competition.
For that fundamental reason I am one of those hon. Members who are rather more sceptical of these directives than the Parliamentary Secretary himself indicated. I hope that he will meet my first query as to the total cost. However, I recognise that he can give no hint to this House of the true invisible cost of these schemes as a result of diverting resources from the efficient to the inefficient.

11.6 p.m.

Mr. Geraint Howells: I have listened with interest to many of the points made by hon. Members. Whatever our views about the structural problem in this country and other countries of the Community, to many small and large farmers farming is a way of life.
One matter that I should like to raise tonight—I am sure that the majority of hon. Members will agree—is that, whatever the outcome of the farm structure in the years to come, we must not introduce any sort of element of compulsion in order to move any farmer from the land, whether he be in Wales, Scotland, England, Northern Ireland, or anywhere in the Community. If those people prefer to be small farmers—farming 10 or 20 acres or even 1,000 acres—that is their way of life.
I believe that they have played a major role, although not perhaps in producing food for the country. I also believe that we have a social problem as well. If we do away with many of our part-time farmers, in many areas more depopulation will take place. Over a period of time these small farmers have been of benefit to the community in which they have served and lived. I hope that the Minister will do everything to persuade his colleagues in Europe not to introduce any element of compulsion whatever in the years to come.

Mr. Body: Except on the taxpayers.

Mr. Howells: I should also like to mention the plight of the marginal farmer. I hope that the Minister will say something about the inquiry that is now taking place into the future role of the marginal farmers. As I have said on many occasions, they can play a major role as well in increasing production from that particular type of land. I hope that many of those who are farming in the marginal areas, which have been deprived under the orders and directives that we have accepted from the EEC during the last few years, will come under the hill area compensatory allowance scheme in the years to come.
I hope that the Minister will be able to let us know when he will be able to finalise that inquiry and others which are looking after the interests of the marginal farmers.

11.9 p.m.

Mr. Strang: Perhaps I may reply briefly to a number of points made by hon. Members. The hon. Member for Bodmin (Mr. Hicks) referred to directive 72/159, on modernisation. He asked whether this was a national aid only. In the United Kingdom context, this is the farm and horticulture development scheme which is supported by FEOGA to the extent of 25 per cent. of total expenditure.
I agree with the hon. Gentleman's comments on the proposal to reduce the minimum qualifying area from three hectares to two hectares. As for extending the area eligible for compensatory allowances under the directive on less favoured areas, I must say that hon. Members are rather underestimating the stringency of the criteria. In fact, the United Kingdom went to considerable lengths to secure the maximum coverage for this directive. It is fair to say that this is one of the measures out of which we do very well financially. It is also worth noting that France recently endeavoured to extend its area but was refused.
One of the considerations overlooked by hon. Members is that if one brings in too dense a population, it throws the area that it is intended to cover outwith the necessary criteria and renders it ineligible. I shall not go into any more detail, although I sympathise with the general objectives of extending the less favoured areas directive's coverage. But if hon. Members look hard at the criteria in the directive, they will find that it is not as easy as they suggest and that, of course, 41 per cent. of the United Kingdom's agricultural area is covered already, with Ireland the only country with a higher percentage.
On this general question of the role of financial incentives in encouraging structural reform and encouraging farmers to leave the land and to amalgamate, I tend to agree with the observation of the hon. Member for Londonderry (Mr. Ross). One can exaggerate the impact of these measures, and that is why we should be pretty hard headed when looking at the cost. It is no use spending a great deal of money if it is likely to have little effect. As I indicated in opening this debate, we have found that our own scheme, which was introduced in the 1967


Act, has not been a success in terms of its objective of achieving farm amalgamations. Therefore, when the hon. Member for Devon, West (Mr. Mills) speaks as though we had achieved a great success in this connection, I am not sure whether he is referring to a historical fact of life in that we have had our good farm structure for a very long time, or whether he is suggesting that recent Governments can claim credit for this. I very much doubt the latter.

Mr. Peter Mills: I agree with the hon. Gentleman when he says that the amalgamation scheme has not worked very well. But what has happened is that both Governments have provided alternative work. In many small towns in the South-West there are now factories set up where there is alternative work for young people who used to work on farms.

Mr. Strang: I do not dissent from that. I think that the hon. Member will also agree that our pricing policy over the years has probably had an effect on the number of smaller holdings and that we have genuinely endeavoured to relate our prices to the efficient producer. To the extent that there is a case for these measures seen from a United Kingdom standpoint, perhaps the less favoured areas directive would make it easier for us to secure greater restraint on common prices. For example, we support the nondelivery premiums for milk under the milk action programme not so much as a means of moving milk producers out of production as a compensation for what we should like to see, namely, a policy of total restraint on the common milk price.
On the general point about West Devonshire, we must not forget that we are now discussing these structural proposals against a background of very high unemployment throughout Europe, where more than 6 million people are out of work. That is likely to have a much greater impact on changes in this direction over the next few years than any measure that we are discussing now.
Turning to the specific matter raised by the hon. Member for Londonderry in

relation to the Irish Republic and Northern Ireland, I agree that we do not want to see a measure which simply provides aid for the Republic when there is just as good a case for its implementation in certain parts of Northern Ireland. Certainly we have in mind the two-river catchment areas referred to by the hon. Member—the Blackwater and the Finn-Lacky—as cross-border catchment areas where we believe that there is a general willingness to co-operate and implement a scheme of this nature.
The limit on the element of machinery does not apply to the land drainage cost. All land drainage costs qualify for grant. The limit applies only to the total grants for co-operatives that purchase machinery.
The hon. Member for Holland with Boston (Mr. Body) asked for an estimate of the cost. The Commission's estimate of the FEOGA cost per annum is about 12 million units of account. Over five years the total cost to FEOGA is estimated to be 65 million units of account. I emphasise that we are in the very early stages of discussion of these measures. They have been discussed only at official level. They have not yet come to the Council. We see a great deal of work to be done in modifying them. As I have indicated, we are not very enthusiastic about parts of them. That is generally accepted by hon. Members, including the hon. Member for Bodmin (Mr. Hicks) from the Opposition Front Bench.
I agree with the hon. Member for Cardigan (Mr. Howells) that there can be no question of compelling any producer to leave the land.
We have had a useful debate. A number of points have been made, from none of which I dissent. The views of hon. Members, and perhaps more especially the comments of the Scrutiny Committee, will be helpful to the Government in pursuing these matters in the Community in the months ahead.

Question put and agreed to.

Resolved,
That this House takes note of Commission Documents Nos. R/3069/77 and R/3121/77 on Farm Structure.

SERVICE FAMILIES (MEANS-TESTED BENEFITS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]

11.17 p.m.

Mr. Robert Boscawen: I am glad to be able to raise the issue of Service men's families in receipt of means-tested beenfits at a time when the report of the Armed Services Pay Review Body is before the Prime Minister.
The fact that about 8,000 families have to go cap in hand for rent rebates and other benefit entitlements is a national disgrace. But for the fact that many Service men's wives are earning, the figure would be much higher. It is the most unacceptable tip of the iceberg of the Service pay problem as a whole that is present at all levels of the Armed Forces. There is widespread concern about the inadequate level of pay.
In a recent visit to a resident battalion in Londonderry that the Secretary of State permitted it was disturbing to find that more than a quarter of the 250 or so married families, despite the special Northern Ireland allowance, were in receipt of rebates to keep their pay above the poverty line. The men are often working an 18-hour day for prolonged periods without any overtime. They do their arduous job extremely well and with great good humour. However, their families a few miles away are badly off compared with many of their civilian friends and relatives. There are few jobs available for their wives and there is no chance of moonlighting. These circumstances are having an effect on the wives and families and on the Service men.
Service men are the last to complain. Often they are too shy or too proud to tell outsiders what they feel about these matters. However, the fact that many of the wives and families are showing a new militancy about the pay of their husbands is a matter for shame. The manifestations of the past few days demonstrate in no uncertain terms that they expect the Government to take action, and soon.
The young private soldier, sailor or airman with a family of small children is the prime example of the inequality of the poverty trap. I am astonished that the

last two reports of the Armed Forces Pay Review Body do not mention that there are families which are not only taxed to pay directly for their own supplemental benefits, but which, when awarded a rise in pay, suffer an increase in their tax bite and immediately begin to forfeit their benefits, so that at the end they are left only a few pence better off. The Minister of State should know only too well after his experience at the Treasury that the poverty trap bites into this kind of family.
The excellent statistical section of the Library has prepared for me a list of figures which illustrate clearly how the poverty trap affects members of the Armed Forces. I shall mention only one in the time available, but it illustrates the situation very well.
A 10 per cent. pay increase for a private, grade IV, scale A, band I, married, with two children, will mean even if his accommodation charge is not increased, only 81p more a week in his pocket or a 2·1 per cent. increase in his take-home pay, which is £38·62. That is after allowing for all the latest increases in child benefits and the reduced contracted-out rate for his national insurance contribution. The explanation is that he loses some of his family income supplement automatically and some of his rent and rate rebates as a result of his increase in pay.
If Service men are given the Irishman's rise of last year, when accommodation and food charges rose at the same rate—in other words, this year up by 10 per cent. again, which is what is feared by many Service men at present—their take-home pay will be only 1·5 per cent. above what it is today. As things stand at the moment, to raise them out of this manmade slough of the poverty trap the Service pay of the family that I have illustrated will have to rise not 10 per cent. or even 20 per cent. from the present £41·26 gross, but much nearer 50 per cent.
I understand that for that grade of Service man's pay to be equal to what he would receive on short-term unemployment benefit together with the tax rebate that he would receive if he were unemployed, it would mean gross pay of about £65 a week. That is the measure of how disturbingly far behind the private soldier's pay lags compared with what he


might earn as a civilian. It illustrates well the appalling muddle of the interrelationship of low pay, inadequate child benefits, over-dependency on means-tested social security and high taxation.
Service men on means-tested benefits cannot ignore the poverty trap. The Pay Review Body cannot put right the tangle of this inter-relation between tax and social security benefits, but it should at least pay attention to it and ensure that individuals who are affected by it have their pay jerked up substantially so that, in as short a time as possible, they can be moved outside it altogether.
I hope that the Government will take on board the effect of the poverty trap on these low-paid Service men. It will not be sufficient for the Government to say that the tax allowances may be raised tomorrow, or that the level of income tax will be reduced. Even if the tax take on the Service men were to be halved, the poverty trap would still mean that a 10 per cent. rise in gross pay would not make up for increases in the cost of living.
The overstretched, hard-working members of the Armed Forces do not expect to be given more than the country can afford, but they have a right to justice. Justice in their case means pay which is comparable with the earnings of skilled men in civilian life. They should be given that as soon as possible. For their self-respect, as for our self-respect in the House and the country, they should not have to do all the dirty jobs that we have served them and then stay below the level at which they must rely upon means-tested benefits.
Our Armed Forces are smaller than they have ever been in modern times. They should be properly paid and equipped. One young Doncaster-born wife of a guardsman in Londonderry to whom I talked a few weeks ago said "We really are very poor indeed. Yet I think that we are still happier than those at home because we feel that we are part of a team doing a real job." I believe that they are doing a real job—there and everywhere else where they are called upon to serve.
The Armed Forces of the Queen are poor yet honest defenders of our country's liberty. We value the job that they are doing. We demand that this Government set the record straight. If the Secretary of State cannot get his way in

the Cabinet and go a long distance towards taking the Service men out of the poverty trap, he owes it to them to resign.

11.28 p.m.

The Minister of State, Ministry of Defence (Dr. John Gilbert): I congratulate the hon. Member on his good fortune in having an Adjournment debate and on raising this important subject, which is of concern to all sides of the House. I accept his strong feelings on the matter, and I am grateful to him for the moderate tone in which he put his case. I hope that he will accept that Ministers feel as unhappy about this situation as he.
I speak with some difficulty this evening. As hon. Members know, the Armed Forces Pay Review Body report was submitted to the Prime Minister on 31st March. Everybody knows that a pay increase for the Services is on the way and that it will be backdated to 1st April. Everybody knows that I am able to speculate neither about what that report says nor about the Government's response to it.
The debate covers a certain amount of confusion in the public mind on the question of the military salary and some of the means-tested benefits. I shall start by trying to set the matter in perspective.
Perhaps I could take, first, the question of the military salary itself. As has been explained often before, this is based on the fundamental principle that Service men's and Service women's pay should be comparable with civilian earnings in jobs of equivalent weight, including those with similar skills and responsibility. To the resultant figure there is added, as hon. Members will know, as extra element, the "X" factor, which is currently set at 10 per cent., in recognition of the balance of disadvantages as against the advantages which exist in Service life. From the resultant military salary, which is set without regard to individual family circumstances—that is, whether the Service man is married, or how many children or other dependants he may have—are deducted charges by which he pays for his food and accommodation, except in very special circumstances, as for example when he is serving under field conditions on operations.
The concept, thus, is that the Service man should, like his civilian counterpart, receive the rate for the job, and, like the


civilian, pay for his own living expenses, while being eligible, subject to a set of standard criteria, for the welfare benefits that are available to the community as a whole.
The military salary concept was introduced in 1970, following the acceptance by the previous Labour Administration of the recommendations of the National Board for Prices and Incomes, and the concept was endorsed by the incoming Conservative Administration, which established the Armed Forces Pay Review Body to make recommendations on Service pay.
As we all know, Governments of both major political parties have found it necessary to introduce pay policies. These pay policies have had the inevitable effect of disturbing the normal arrangements for wage determination, including the fixing of the military salary by comparison with civilian earnings. This is extremely unfortunate, but I do not think that any hon. Member would deny the necessity for the overall policies—leaving aside the difficulties that their implementation occasionally creates—which the Government have been seeking to pursue in the overriding national interest in the last three years by seeking to reduce inflation. I hope that not many people would attempt to deny the success of these policies in terms of a consistently falling inflation rate.
Everyone will benefit from the lower rate of inflation—Service personnel and Service families along with everyone else.
The Armed Forces are not unique in having had their pay affected by pay policies. I would be the first to recognise that the consequences for the Armed Forces that have resulted from pay restraint have been particularly harsh in many cases. It is the loss of comparability with civilian earnings which, as the Government have accepted on many occasions—myself and my right hon. Friend the Secretary of State, at this Dispatch Box—is the fundamental problem to be put right as soon as economic circumstances permit.

Sir Timothy Kitson: With Catterick in my constituency, I recognise the difficulties of so many soldiers at present. What makes the comparison difficult is the fact that a

civilian in a comparable job, as the right hon. Gentleman has suggested, is able to choose his living quarters. The problem with so many people in the Army is that they are allocated quarters which at present are extremely expensive. A man who, as the right hon. Gentleman said, has a comparable job in the Army finds himself £7 or £8 a week worse off than he would be on the dole, because not only are his accommodation charges so high but very many of the quarters in Catterick are heated only by electricity, and the inflation in electricity charges is a great deal more than the compensation for inflation represented by his salary increases. Therefore, one cannot compare the two positions. A civilian can at least choose his own accommodation. A man in the Army is allocated quarters over which he has no choice.

Dr. Gilbert: I am obliged to the hon. Gentleman. I dissent from only one element of the proposition that he puts forward—that is that the Service man would normally be worse off than someone on the dole. It goes rather wider than this debate. If I have time, I shall comment on that matter. But I certainly take the points that the hon. Gentleman has raised. These are intended to be compensated for, in part at least, by the "x" factor, which takes cognisance of the turbulence in Service life and the fact that the Service man does not have the freedom of choice of accommodation that the person in private life has, as the hon. Gentleman points out.
As I have said, it is the loss of comparability which has to be put right as soon as our economic circumstances permit. In the meantime, it is inevitable that the wholly understandable and proper concern about the central issue results in attention being focused on conditions of service and on such matters as are the subject of the current debate. I hope to show that the remarks made on this subject by the hon. Member are rather off target, although I do not for a moment dispute the genuineness of the concern for the forces' welfare which has led him to introduce this subject for debate.
The hon. Gentleman refers to "means-tested benefits". This is an expression which in some people's mind conjures up images of the 1930s dole queues and


carries with it the implication that the recipients are in dire poverty. However, the situation nowadays is considerably more complex, since there exists a wide range of benefits for which the qualifying levels vary widely. Entitlement is generally dependent on family size and sometimes on net income after tax, rent or mortgage and other expenses have been deducted. Consequently, many individuals with the same gross pay may find themselves on different sides of the qualifying line.
When replying to a Question from the hon. Member on 21st March, I reminded the House of an important point made by the Armed Forces Pay Review Body in its 1974 report. It was made in connection with rent and rate rebates and it therefore bears repeating. The body stated that disqualification from rebates altogether would require a minimum weekly rate of pay for all Service men of the income needed by the Service man with the largest family to exclude him from entitlement. It concluded that such a proposition was patently absurd.

Mr. Boscawen: That was before child benefit was introduced. Child benefit is paid automatically as of right. That makes a difference.

Dr. Gilbert: I accept what the hon. Member says.
I turn to the question of rent and rate rebates, which was the main subject of the hon. Gentleman's remarks. This is the one area in which Defence Ministers are responsible, in so far as the scheme for members of the Armed Forces in public accommodation is administered by the Ministry of Defence. The qualifying levels and the amounts payable under the MOD scheme are essentially the same as those which apply under the local authority schemes. The MOD scheme operates on a world-wide basis, since married quarters charges are the same everywhere and because allowances paid overseas compensate Service personnel only for the extra costs that they incur. Thus, a man's eligibility will not change if he moves with his family from, say, Aldershot to Hong Kong or any other place.

Mr. David Walder: The hon. Gentleman may be missing the point, that certainly there is considerable doubt whether some of the family benefits are payable overseas.

Dr. Gilbert: I am advised that in respect of rent and rate rebates what I have said is correct. I shall look into any point that the hon. Gentleman likes to put to me. I hope that I shall not have to give way again, because I am trying to reply to the debate.
The total numbers in receipt of rate rebates fluctuates throughout the year, the main determinant being the pay award in April, which brings them down very considerably, and then the figures tend to move upwards through the year and to be raised in a step increase in November each year when the qualifying levels are revised.
I have tried to make some investigations into how those in the Services compare with those in the civilian sector. Such comparisons are very difficult to make, and all the figures would have to be treated with very considerable reserve because necessarily they are estimates. The total in receipt of benefit—that is, rent and rate rebates—as a proportion of the total number of occupied married quarters and hirings is about 9½ per cent. compared with the percentage of employed council tenants—which is roughly the same analogue for the civilian sector—of 13·3 per cent. for the population as a whole. In other words, 50 per cent. more civilians in public accommodation receive rent and rate rebates. I do not say that either situation is satisfactory, but it helps us to get the matter in perspective.
I have already referred to the views expressed by the AFPRB in 1974 on the question of pay in relation to rebates. In its report of the following year, it returned to the same theme, expressing itself in stronger language:
There appears to be a great deal of misunderstanding, both in the Armed Forces and outside, about the nature and purpose of rent and rate rebate schemes. So far as they apply to the Armed Forces, they have been misinterpreted, in some instances misrepresented, either as some kind of social stigma or as evidence that the earnings of some members of the Armed Forces are below what is described as the 'poverty line', or both. Interpretations of this kind are erroneous. The purpose of the rebate scheme is to assist people according to their family means and their family circumstances.
Again, that is not me speaking as a Minister but a direct quotation from the AFPRB report of 1975.

Sir Timothy Kitson: Could the Minister explain one thing? A private with 12 years' service and three children in a C-type quarter has gross pay of £53.90. His income tax is £5.26, his national insurance is £2.76 and his quartering charges £9.59. His net entitlement is therefore £36.29. He gets £2.31 rent rebate, £4 allowance for his children, and ends up with £42.60, so he is £4.50 a week worse off than in civilian life. That is the point that we are trying to make and that is the matter in respect of which there is not a fair comparison with civilians.

Dr. Gilbert: The hon. Gentleman threw about eight statistics at me. I would not seek to impugn any of them, but before I could answer I should have to have them before me in writing. I shall write to him after I have had a chance to study his remarks in Hansard.
I should say something about the poverty trap, a subject the hon. Gentleman raised with me both today and in a supplementary question to a Question that he put to me a couple of weeks ago. It is true that when anyone receives any benefit determined by reference to his family circumstances and income, the amount of benefit payable will be reduced when his pay is increased. That is an inevitable product of means-tested benefits, and the problem could be solved only by a much higher level of flat-rate, universal benefit. It would be an excellent idea if we had unlimited resources, but, as Conservative Members are the first to point out when we are discussing many subjects, resources are not unlimited.
Many factors affect the Service man currently receiving benefits. The April pay rise, about which I am unable to speculate, and the Chancellor's Budget proposals, yet to be announced, will undoubtedly be major factors. However, setting aside tax changes, I shall be extremely surprised if no one receives a net gain in income levels after the Services pay award of this year.
I should stress that nothing that I have said is meant to deny that Service pay is currently lower than it should be under the military salary concept. This is a situation of which the Government are fully aware and in which Ministers take no pleasure. I assure the hon. Gentleman that it will be taken into account fully in our current consideration of the AFPRB's 1978 report.
What I have to reject, however, is the suggestion that the claiming of benefits such as those to which I have referred in itself shows that large numbers of Armed Forces personnel are below the so-called poverty line. That simply is not so, though there are of course certain families in very straitened circumstances. One fully understands that, and we all regret it. Neither the Service men nor any other claimant is helped by anyone trying to make out that some sort of stigma is attached to the benefits designed to aid a substantial proportion of the community according to their family circumstances.

Question put and agreed to.

Adjourned accordingly at fifteen minutes to Twelve o'clock.